People's United (PBCT) To Acquire First Connecticut Bancorp
Zacks Investment Research | Jun 19, 2018 09:54PM ET
People's United Financial (NASDAQ:PBCT) will be acquiring First Connecticut Bancorp (NASDAQ:FBNK) , a Farmington, CT-based community bank in an all stock deal worth nearly $544 million. The company expects the deal to be accretive to earnings going forward.
People’s United has long since been making strategic acquisitions on the back of its strong balance sheet. These buyouts have helped it strengthen fee income sources and fortified its presence in the concerned regions. The company expects this latest deal to be a low risk transaction that would give a solid boost to its deposits balance.
CEO of People’s United, Jack Barnes, said “They have a long-standing relationship-based approach to serving their customers and complementary commercial and retail capabilities. This, coupled with their experienced team and similar culture, will strengthen our well-established presence in the region.”
Terms of the Deal
Per the terms agreed by directors of both the companies, shareholders of First Connecticut will be receiving 1.725 shares of People’s United’s common stock for each share held.
Based on the Jun 18, 2018 closing price of First Connecticut, the deal has been valued at $32.33 per share.
Though the acquisition is still subject to regulatory approvals and consent of First Connecticut’s shareholders, the company expects to close it by the last quarter of 2018.
Benefits From the Transaction
People’s United expects the deal to be 5 cents accretive to earnings per common share upon successful fully phased-in cost savings. The company expects to save nearly $33 million (pre-tax) in 2019. Furthermore, it expects an internal rate of return of 18% from this transaction.
Also, the acquisition will improve People’s United position in deposit market share ranking in Connecticut from third to second. Further, First Connecticut’s strength in commercial and retail banking services will help bolster People’s United’s loan portfolio.
Our Take
People’s United’s acquisition streak has helped it expand operations and improve financials. Its progress on strategic efforts to grow reflects capital and liquidity strength. Moreover, improving environment for U.S. banks in the form of rising interest rates, lower tax rates and softer regulations, is likely to support the company’s financials in quarters ahead.
Shares of People’s United have gained 12.3% over the past year, underperforming the 15.4% rally of the industry .
Get The News You Want
Currently, People’s United carries a Zacks Rank #3 (Hold).
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