The collapse of merger talks between NFS Financial Corp. and a Portland, Maine-based banking company stemmed from concerns by the buyer about leaks of confidential information, according to a source familiar with the talks.
The source said People's Heritage Financial Group called off merger negotiations because "it seems as though there was a confidentiality problem."
"Every time a step was taken, stock was traded, rumors were afloat," the source said. "It was not a tenable situation for it to go on in that manner."
If the deal had gone through, the resulting company would have had $3 billion of assets and 78 branches in Maine and New Hampshire.
Officials at Nashua, N.H.-based NFS and People's Heritage declined to comment.
NFS had retained Tucker Anthony Inc, as its financial adviser for the talks.
The source said People's Heritage was concerned about insider information leaking from NFS. The individual said the leaks caused NFS stock to surge at least twice during negotiations, including a $5 jump on one day in the last month.
The rises in stock made the deal too costly for People's Heritage, which finally pulled the plug at a late stage in the talks, the source said.
The talks had be going on since Labor Day.
"I can see where [confidentiality] could be a problem," said Michael Cerato, vice president of investments for First Albany Corp. in Nashua. "There's a lot of potential problems with merger talks, and confidentiality is one, of them,
But Mr. Cerato declined to speculate on why the deal was scuttled. There's going to be all kinds of rumors as to why the merger was terminated," he said.
The $614-million-asset NFS reported Nov. 22 that the talks had been terminated, but management declined to disclose the reasons and it never publicly identified People's as the buyer.
The talks, which were prompted by an expression of interest by People's Heritage, were first announced Nov. 11.
