DNBK Danvers Bancorp, Inc. (MM)

On Friday, People's United Financial Inc. (PBCT) completed the acquisition of Massachusetts-based Danvers Bancorp Inc. (DNBK). The company paid 18.5 million shares of common stock and $214.5 million in cash for the acquisition.

The acquisition was completed following the approval of the proposed deal from the Office of the Massachusetts' Commissioner of Banks and the Massachusetts Board of Bank Incorporation on June 27, 2011. Further, the deal was approved by Danvers Bancorp shareholders and the Office of Thrift Supervision in May.

In January 2011, PBCT announced the acquisition in a 55% stock and 45% cash transaction valued at $493 million. Based on final election results and with the application of proration provisions, which were mentioned in the agreement, Danvers shareholders received the consideration.

Danvers shareholders, who made a valid stock election and did not give any preference, received 1.624 shares of PBCT common stock for each share held. Further, for Danvers shareholders, who made valid cash election of about 55.3% of the shares held was exchanged for cash and the remaining exchanged for PBCT common stock, at the rate of $23.00 for each share exchanged for cash, and 1.624 shares of PBCT common stock for each share exchanged for stock.

As per the terms of the agreement, fractional shares of PBCT common stock was not issued and Danvers shareholders received cash based on the closing price of PBCT common stock on June 29, 2011.

With PBCT’s existing presence in Massachusetts, Danvers Bancorp makes it New England’s largest independent bank and the seventh largest bank, both in Massachusetts and Boston MSA.  Danvers Bancorp, a high-quality commercial institution, offers an excellent platform for growth and balances the company’s continuous footprint from Worcester, in central Massachusetts, through Boston and New Hampshire. PBCT expects the transaction, which marks a platform of growth for the company, to be accretive to operating earnings with an Internal Rate of Return (IRR) greater than 15%.

With Danvers’ 28 new branches, PBCT nearly doubled their existing Massachusetts footprint while providing added expediency to customers. PBCT will continue to build relationships with personal and business customers attributed to its unique brand of relationship-based banking and further taking advantage of the growth potential in the Boston markets.

PBCT, which competes with companies such as New York Community Bancorp Inc. (NYB) and Hudson City Bancorp Inc. (HCBK), benefits from a healthy business portfolio that has grown inorganically over time. With about $28 billion in assets, the company provides consumer, commercial and wealth management services through its subsidiary, People's United Bank, with nearly 370 branches in Connecticut, Vermont, New Hampshire, Massachusetts, Maine and New York.

PBCT is trying to overcome the challenging economic environment through opportunistic acquisitions and a stable interest margin. Recent acquisitions coupled with reported positive earnings reflect its strength in capital and liquidity of the company. Though credit metrics remained volatile, loan portfolio and deposits growth acted as positives during first quarter 2011. Moreover, we believe PBCT’s earnings will improve based on synergy gains resulting from the completion of all the recent acquisitions.

PBCT currently retains its Zacks #3 Rank, which translates to a short-term ‘Hold’ rating. Moreover, we maintain our long-term “Neutral” recommendation on the stock.

 
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