A congratulatory phone call paved the way for People’s United Financial’s agreement to buy BSB Bancorp in Belmont, Mass.
The $3 billion-asset BSB determined in early 2018 that it should consider selling itself, according to a
Conversations between the companies began on June 19 when Robert Mahoney, BSB’s chief executive, called Jack Barnes, CEO of the $44 billion-asset People’s United, to congratulate him for an
“During the conversation … Mahoney mentioned that BSB Bancorp was at a point in its development where it was also reviewing strategic options for moving forward,” the filing said.
The moves show how casual conversations can lead to mergers. It also demonstrates how, in the case of People’s United, an acquirer’s reputation can bring about new M&A opportunities.
People’s United wasn’t the only bank Mahoney contacted. During the spring, he met with the CEO of a similar-sized bank to discuss an acquisition, but the target wasn’t interested in selling.
In July, he met with the CEO of an unnamed company that strongly resembles Independent Bank Group in Rockland, Mass. While the CEO indicated that he would contact Mahoney, the bank instead agreed to buy another institution on Sept. 20. (That was the same day that Independent announced
An early August discussion with the leader of another potential buyer went nowhere.
The filing noted several reasons Mahoney was out talking to other CEOs about selling, including the need for more capital to keep growing, increasing competition for deposits and loans and a flattening yield curve that had put pressure on funding costs and profit.
BSB’s directors were also felt that the company’s 132% loan-to-deposit ratio presented challenges.
The courtship with People’s United gained traction after Mahoney’s call to Barnes. Kirk Walters, senior executive vice president of corporate development and strategic planning at People’s United, had a productive lunch in Cambridge, Mass., with Hal Tovin, BSB’s chief operating officer, that set up a meeting of the companies’ CEOs.
Barnes and Mahoney met in person on Aug. 20, at which point Mahoney “indicated that one of the alternatives being explored by BSB Bancorp’s board was a strategic acquisition by a larger financial institution such as People’s United,” the filing said.
Barnes said on Sept. 19 that People’s United was interested in an all-stock acquisition. A week later, Barnes agreed to a 2-to-1 exchange ratio.
A Nov. 5 letter of intent reaffirmed the exchange ratio and established a 45-day exclusivity period. BSB’s board unanimously approved the merger agreement during a Nov. 26 meeting; the deal was announced the next day.
The acquisition, which is expected to close in the second quarter, priced BSB at 160% of its tangible book value. People’s United plans to cut $16 million in annual noninterest expenses and incur about $28 million in merger-related costs.
People’s United expects the transaction to be accretive to earnings per share. It should take about three years to earn back any dilution to People’s United’s tangible book value.
“We share a similar culture, a customer-centric approach to banking and guiding principles centered on relationships, personalized service and community giving,” Barnes said in a release announcing the deal. “The acquisition will deepen and expand our presence in the Greater Boston area, particularly in the suburbs west of the city, which are attractive banking markets.”
Mahoney is in a position to receive $5.8 million in compensation, including nearly $2.9 million in cash, in conjunction with BSB’s sale. Tovin is set to receive $3.3 million.
Mahoney also agreed to a six-month noncompete agreement and a nine-month nonsolicitation agreement. People’s United will provide Mahoney with office space and secretarial support for nine months after BSB’s sale.
