Berkshire Hills Bancorp will acquire the Springfield-based Hampden Bancorp in a $109 million deal slated to close in the second quarter next year.
"This in-market partnership will create a strong platform for serving our combined customers, while producing attractive returns for both our existing shareholders and the new shareholders from Hampden joining us in this transaction," Berkshire President and CEO Michael P. Daly said in a press release announcing the deal. "We will move into the top five position in deposit market share and plan to use this opportunity to further capitalize on our strong product set and culture of customer engagement. This merger complements our expansion initiatives in Central Massachusetts and Hartford, a combined market area that is the second largest in New England."
In a conference call with investors last week, Daly played his cards close to the vest and said that Berkshire Bank was mostly focusing on organic growth in the near term, as opposed to looking for banks to acquire.
Meanwhile, Hampden Bank has faced pressure from activist shareholders who have tried to get their representatives elected to its board of directors and who have filed numerous proxies with the Securities and Exchange Commission accusing the bank of not acting in its shareholders’ best interests. Hampden Bank’s shareholders are to vote on the latest proposal from the Texas hedge fund Clover Partners at their annual meeting today.
The deal will increase the Pittsfield-headquartered Berkshire’s total assets to $7.1 billion, including $706 million in acquired assets from Hampden.
Hampden operates 10 branches in the Greater Springfield area and posted $508 million in net loans and $490 million in deposits in the third quarter this year. Berkshire operates 11 branches with $627 million in deposits in this market. Berkshire will have a pro forma market cap of approximately $740 million and 100 branches serving customers and communities across New England and New York. Pro forma tangible equity to tangible assets is expected to improve to 7.4 percent when the merger is completed.
"Our two banks share rich histories, consistent core values and a strong commitment to customers and communities. I’m proud of our 162 years of serving customers in our markets and believe the combination created by our two companies will benefit our clients, communities and shareholders," Glenn S. Welch, president and CEO of Hampden Bancorp, said in the statement.
Under the terms of the deal, each outstanding share of Hampden common stock will be exchanged for 0.81 shares of Berkshire Hills common stock. The merger is valued at $20.53 per share of Hampden common stock based on the $25.35 average closing price of Berkshire’s stock for the five-day period ending Nov. 3. The $20.53 per share value represents 133 percent of Hampden’s $15.49 tangible book value per share and a 6 percent premium to core deposits based on financial information as of Sept. 30.
The transaction is intended to qualify as a reorganization for federal income tax purposes, and as a result, the shares of Hampden common stock exchanged for shares of Berkshire common stock are expected to be transferred on a tax-free basis, the banks said in a statement.
The agreement has been approved by the unanimous votes of the boards of directors of both companies and is still subject to the approval of Hampden’s shareholders and the requisite state and federal regulators.
Two Hampden directors will be appointed to Berkshire’s board of directors and Glenn S. Welch will be joining Berkshire as regional president for the Pioneer Valley and Connecticut.
Sandler O’Neill & Partners L.P. served as the financial advisor to Berkshire, and Sterne, Agee & Leach Inc. served as the financial advisor to Hampden. Luse Gorman Pomerenk & Schick P.C. served as outside counsel to Berkshire, while Goodwin Procter LLP served as outside counsel to Hampden.
