- Connecticut
The market is only gelling for buyers and sellers that meet some rather stringent criteria.
August 19
Brookline Bancorp Inc. is again parting with its cash.
Nearly two years after hiring CEO Paul Perrault, known for his acquisitiveness, the capital-heavy Brookline announced Wednesday that it would buy another Massachusetts company, First Ipswich Bancorp, for $19.7 million.
Since Perrault's arrival, investors and analysts have been waiting for the $2.5 billion-asset company to make its move. Though small, the deal is meaningful, because it expands Brookline's reach into affluent communities northeast of Boston.
"This is the type of transaction they've been telling people they wanted to do," said Matthew Kelley, an analyst at Sterne, Agee & Leach Inc. "These are the deals that are most attractive out there in the marketplace. Once you get into the larger transactions ... you're going to get less attractive, lower pricing."
Under the agreement, First Ipswich stockholders are to get $8.10 in cash per share. The price is enticing, analysts said, at 147% of tangible book value.
Though the deal would pay a big premium to Ipswich's $2.26 closing price on Tuesday, "the overall multiples don't look that out of whack," Kelley said. Brookline will pick up Ipswich's deposits at a 3% premium, and the total dilution of Brookline's tangible book value is expected to be less than 2%.
The deal "seems to be a particularly good choice" for Brookline, said John Carusone, the president of Bank Analysis Center in Hartford. "I think Paul Perrault should receive kudos for making an attractive acquisition on favorable terms."
The all-cash transaction would help Brookline deploy some of its excess capital. The deal is expected to reduce its tangible common equity ratio to between 15% and 15.5%, from 17.2% at Sept. 30, the company's chief financial officer, Paul Bechet, said in an interview.
Bechet said the company will continue to eye opportunities throughout New England and has plenty of capital with which to go shopping. "Any time there's an attractive franchise that's available at a reasonable price, we will give serious consideration to looking at it," he said. "We hope that our pricing is fair to all parties concerned but that we don't rationalize and overpay."
The company has faced high expectations since hiring Perrault in early 2009. As chief executive of Chittenden Corp. in Burlington, Vt., he built a $7.4 billion-asset regional power through purchases. The company was sold to People's United Financial Inc. of Bridgeport, Conn., in 2008.
Even before Perrault arrived, Brookline had a taste for acquisitions. Its last purchase was in 2005, when it bought Medford Co-operative Bank in Medford, Mass. It also acquired Lighthouse Bank in Waltham, Mass., in 2001.
Though the Ipswich deal is relatively small, observers said Perrault is trying to replicate the Chittenden strategy.
Mark Fitzgibbon, an analyst at Sandler O'Neill & Partners LP, said Perrault has a disciplined approach to deploying capital, and at Chittenden he went after smaller deals. "It wouldn't surprise me if Brookline were to do more of these small, sort of fill-in kind of deals and more methodically lever down the capital, rather than one big blockbuster transaction," he said.
Meanwhile, the First Ipswich deal poses minimal risks for Brookline, Fitzgibbon said.
For starters, Brookline is familiar with First Ipswich's markets; it has five branches on Boston's north shore, and a sixth in downtown Boston, and Perrault is retaining the bank's chief executive, Russell Cole, who has worked with him, Fitzgibbon said. Brookline said it plans to operate the company's bank unit, First National Bank of Ipswich, as a separate subsidiary, with Cole at the helm.
"It certainly takes a lot of the unknowns out of the equation" with Cole, Fitzgibbon said.
Yet Damon DelMonte, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., was less enthusiastic about the deal, noting that First Ipswich has been operating under a regulatory order since 2006 requiring it to maintain minimum capital ratios. After factoring in a $3 million loan mark on the portfolio, the price to tangible book value is closer to 182%, he said.
"It seems like they were able to pick up a couple-hundred-million-in assets bank, with a reasonable risk-reward profile," he said. "But I'm not overly excited that this is a great franchise they scooped up."
