UST of Boston Initiates M&A Push in $161M Deal to Acquire Walden

It was only the beginning.

Last week's announcement that Boston's UST Corp. had agreed to buy Acton, Mass.-based Walden Bancorp. for $161 million in stock is the start of what may be a long string of such deals for the company, according to UST president and chief executive Neal F. Finnegan.

UST, which has $2.03 billion of assets, has embarked on what its board calls an "assembly" strategy, which means "assembling additional banking companies" if the transactions make sense, Mr. Finnegan explained.

The UST acquisition is one of several small-scale regroupings announced at the same time as NationsBank Corp.'s Friday agreement to buy Boatmens' Bancshares.

In yet another deal, Magna Group Inc. of St. Louis said Tuesday that it had agreed to acquire Homeland Bankshares, Waterloo, Iowa, for $216 million in cash and stock.

"Boards of directors of community and midsize banks are reassessing their strategies in light of the consolidation sweepstakes occurring with the larger institutions," said John Carusone, president of Bank Analysis Center Inc., a bank advisory firm in Hartford, Conn.

Stanley Wells, an executive vice president at Keefe, Bruyette & Woods Inc., agreed. "Given a sluggish economic environment, marginalized earning- asset expansion capabilities, a well-capitalized banking industry, and intense competition for booking new business, more and more banks are looking for acquisitions," he said.

In the UST-Walden deal, the purchase price equals a reasonable 1.69 times Walden's book value and provides for UST to exchange 1.9 shares of common stock for each share of Walden common under a tax-free pooling of interests.

The transaction would turn UST into a $3.8 billion-asset institution with 65 branches, making it the third-largest commercial banking network in the greater Boston area - after Fleet Financial Corp. and Bank of Boston Corp.

Mr. Finnegan said that UST would differentiate itself from the heavyweight competition by retaining direct contact with customers. The bank will not become a "supermarket provider," he said.

UST caters to consumers and small and midsize companies.

Walden has two bank subsidiaries, Bank of Braintree and Co-operative Bank of Concord, and about $1 billion of assets. It focuses on consumer and small-business banking through 17 branches in eastern Massachusetts.

The Walden Bancorp. deal follows another New England purchase agreement signed by UST in June. It said then that it would buy 20 branches being divested in the BayBanks-Bank of Boston merger, along with about $860 million of deposits and $510 million of loans.

David E. Bradbury, chairman, president, and chief executive of Walden, said no branches would be closed as a result of the agreement. The acquisition is subject to approval by regulators and the shareholders of both companies, and it is expected to close in the first quarter of next year.

Although Mr. Finnegan suggested that his institution would remain independent for the foreseeable future, analysts speculated that UST could soon become a target for regional or superregional expansion in New England.

"If they get to around $5 billion, I can easily see them getting the attention of some bigger company wanting a presence in the Boston area," said Don Kauth, a banking analyst at First Albany Corp.

He mentioned First Union Corp., Charlotte, N.C., and Citizens Financial Group Inc., Providence, R.I., as possible suitors for UST.

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