People's United of Conn. buys Chittenden bank for $2B
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By Bruce Edwards Herald Staff - Published: June 28, 2007
Chittenden Corp., Vermont's largest banking company, is being sold to People's United Financial Inc. of Connecticut for $1.9 billion in cash and stock, the companies announced Wednesday.
Chittenden President and CEO Paul Perrault said the acquisition is a good fit because the two banks share the same philosophy and cultures and will allow for future growth.
"I think we've identified some very exciting growth opportunities and also given the limited overlap and structure of the deal, the combination allows Chittenden to preserve much of what we have built over the years," Perrault said Wednesday in a conference call with analysts. "We will operate in large measure the way we have always operated but with the benefit of being part of a larger and well-run organization."
Perrault said Chittenden and its subsidiary banks would retain their names with no disruption in service.
"Customers will deal with the same people in the same locations where they do business today," he said.
In a subsequent phone interview, Perrault said that over time the combined bank will offer enhanced products and services. He also said that loan decisions will continue to be made locally.
John Klein, chairman, president and chief executive officer of People's United Bank, said in a statement that the transaction combines "two high-performing banks with similar balance sheets, management styles and cultures to create the premier regional banking franchise in New England."
Klein said the acquisition of Chittenden is part of its strategic plan following its conversion to a publicly traded company. That plan, he said, includes making acquisitions in contiguous or near-contiguous markets with similar balance sheets and operating models.
The sale, which is expected to close in the first quarter of 2008, requires Chittenden stockholder and federal regulatory approvals.
While there is little overlap in territory, there will be some consolidation of backroom operations.
The head of the Vermont Department of Banking, Insurance, Securities and Health Care Administration said one area of concern is a potential loss of jobs.
"One our concerns would be the loss of Vermont jobs but we're not anticipating that," Commissioner Paulette Thabault said. "In fact, we've been told the only job losses that would result would be from attrition."
Perrault said that there would likely be some layoffs among the company's 2,200 employees (1,000 in Vermont) but those layoffs would be at a minimum.
"There will be some redundancies that will need to be addressed and so along the way there will be some disruption but in the nature of bank acquisitions it's going to be relatively minor," he said. "I'd also like to point out we're a very dynamic organization and we do an awful lot of different things and so we're building different businesses all the time so we're adding employment."
The acquisition of Chittenden was somewhat of a surprise to one banking industry analyst.
John Carusone, president of the Bank Analysis Center in Hartford, Conn., assumed that, flush with cash from its recent public stock offering, People's would first focus its acquisition strategy in southern Connecticut, New York and New Jersey.
He said Chittenden, on the other hand, has been long sought after as a merger or acquisition partner.
"Chittenden has long been admired by potential suitors but has steadfastly remained aloof for many years," Carusone said.
At approximately $37 a share, he said the deal was fairly priced.
"I think Chittenden stockholders received a good deal and I don't think People's overpaid," Carusone said.
With assets of $7.6 billion, Chittenden has been on a buying spree of its own in recent years, growing through the acquisition of smaller regional banks.
This month Chittenden announced it would acquire Community Bank & Trust in New Hampshire for $124 million. At the end of May, the company completed a $458 million purchase of Merrill Merchants Bancshares in Bangor, Maine.
Chittenden is the third Vermont bank to be sold this year. First Brandon National Bank was acquired by Lake Sunapee Bank in New Hampshire. In May, Factory Point National Bank announced it would be acquired by Berkshire Hills Bancorp of Pittsfield, Mass., for $82 million.
The pending sale of Chittenden and Factory Point would leave 16 Vermont-based banks, with Merchants Bancorp becoming the state's largest banking company with assets of $1.14 billion.
People's is paying for the acquisition with some of the proceeds from its $3.44 billion conversion in April from a mutual holding company to a publicly traded company. The purchase price of approximately $1.9 billion, is approximately 55 percent cash and 45 percent People's United Financial stock.
Based on the average closing price of People's for the three-day period ending June 25, the transaction is valued at $37 per Chittenden Corp. share.
Chittenden will have two seats on the board of directors, with Perrault becoming a member of the executive team that will help integrate both banks.
The combined company will have assets of approximately $22 billion.
Headquartered in Bridgeport, Conn., People's United Bank has assets of $14 billion. It has 160 branches, 75 of which are located in Super Stop & Shop locations across Connecticut, and more than 240 ATMs
Founded in 1904, Chittenden has assets of $7.6 billion with 141 branches in New England through its subsidiaries, Chittenden Bank, Ocean National Bank, The Bank of Western Massachusetts, Flagship Bank and Trust, Maine Bank and Trust and Merrill Merchants Bancshares.
Chittenden stock gained $6.89 Wednesday to close at $35.13 a share on a volume of 3.46 million shares. People's United lost 53 cents to close at $18.18 a share on a volume of 14 million shares.
Contact Bruce Edwards at bruce.edwards@rutlandherald.com.
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