Webster Bank, which has its headquarters in Waterbury, has acquired NewMil Bancorp and gained a presence in Litchfield County in the process.

Waterbury-based Webster Bank gained a foothold in every county in Connecticut last week after its acquisition of New Milford-based NewMil Bancorp. It is the first acquisition by a Connecticut-based bank this year and will bring Webster branches into the few areas of the state where it did not already have a presence, such as Litchfield County.

The acquisition made sense for several reasons, said Art House, spokesman for Webster Bank. NewMil is in a market contiguous to Webster’s footprint, and the bank’s corporate culture and values are well known to executives at Webster.

“They’re a very attractive, well-managed bank,” he said. “They are like-minded partners.”

As of the end of last year, NewMil Bank had $873 million in assets and 20 branches in Connecticut. Webster Financial Corp., the holding company for Webster Bank, is acquiring NewMil Bancorp through a tax-deferred, stock-for-stock exchange of all the outstanding shares of NewMil Bancorp’s common stock. Based on Webster’s closing stock price on April 24, the transaction has an aggregate value of about $172.5 million.

The price was a fair one for both institutions, according to John Carusone, president of the Hartford-based Bank Analysis Center. Webster has a long history of being a disciplined buyer and the bank paid for NewMil on reasonable terms, he said. But it was also a good deal for NewMil, because Webster paid a fair market price.

“It’s the best they [NewMil] could have done for their shareholders,” Carusone said. “They were running out of market Â… The banking stars were aligned for both institutions.”

“This agreement creates significant value for NewMil’s shareholders, customers and the communities we serve. In joining with Webster, we are strengthening a powerful regional franchise that has become the largest independent bank headquartered in New England,” said NewMil Chairman, President and Chief Executive Officer Francis J. Wiatr in a prepared statement. “This partnership will provide our customers access to a broader array of financial services from the same employees they’ve come to know and trust.”

The acquisition brings Webster into every major Connecticut market in force, Carusone said. The institution is poised to become the state’s premier bank.

“Webster continues to enhance its size and its name recognition,” Carusone said.

Preemptive Strike

The greatest addition to Webster’s branch network will be in Litchfield County, according to House. The bank has 158 branches and expects some overlap with NewMil branches, which will be renamed Webster Bank. The bank, however, intends to offer positions to all branch personnel who might be affected when redundant branches are closed, House said. After the merger, NewMil’s board of directors will serve as an advisory board to Webster Bank, with Wiatr serving as its chairman.

The acquisition not only provides Webster with market penetration into Litchfield County, but allows the bank to consolidate operations in Fairfield County, Carusone said.

“I think it’s a well-reasoned transaction for both institutions,” he said.

Webster executives were pleased with the transaction, in part because the spate of mergers and acquisitions over the past few years have left mid-sized banks like NewMil few and far between, House said. With the pool of potential merger partners shrinking, leaders at Webster were pleased the smaller NewMil chose to join Webster, he said.

“Our partnership with NewMil Bancorp is a combination of like-minded institutions that share a vision to be the region’s leading financial service provider,” said Webster Chairman and Chief Executive Officer James C. Smith in a prepared statement. “This alliance unites us with our highly respected partner while deepening Webster’s presence in Litchfield, New Haven and Fairfield counties. We know well Connecticut’s markets and customers.”

The transaction also is likely to affect the plans of other banks both within and outside Connecticut, Carusone said. The local banking scene has been quiet for the past 12 months, so the move registers as an important transaction.

“It preempts out-of-state competitors from establishing a foothold in Connecticut,” he said.

Webster intends to complete the transaction by the end of this year. It is Webster’s first merger since acquiring New Britain-based First City Bank in December 2004.

NewMil Bancorp shareholders will receive $41 worth of Webster common stock for each share of NewMil Bancorp common stock, as long as Webster’s average stock price is between $44.85 and $50.25 per share. If the average Webster stock price is below $44.85, the exchange ratio will be fixed at 0.91. If the average Webster stock price is above $50.25, the exchange ratio will be fixed at 0.82. Exchange ratio is the number of new shares in an acquiring firm given for each outstanding share of an acquired firm.

As part of the transaction, Webster plans to repurchase in open-market transactions up to 20 percent of the deal value, which results in marginal accretion to its diluted GAAP earnings per share in 2007.

Webster Financial Corp. is the holding company for Webster Bank, National Association and Webster Insurance, which has $17.9 billion in assets.