Bank of New York Co. has won the race to buy an elite Connecticut bank that had been actively pursued by many of the region's leading institutions.
In a deal announced Monday, Bank of New York has agreed to buy Putnam Trust Co. of Greenwich for stock valued at $140 million.
Bank of New York officials portrayed the deal as a coup. Although Putnam has just eight branches and assets of $686 million, it reportedly drew interest from such giants as Chase Manhattan Corp., Citicorp, Fleet Financial Group Inc., and U.S. Trust Company of New York.
"We've been on the radar screen of just about every bank east of the Mississippi and north of the Mason-Dixon line," said Michael M. Cassell, Putnam's chief executive.
The deal would give $49 billion-asset Bank of New York its first retail banking presence in Connecticut - and a respected trust and private banking business in one of the world's wealthiest enclaves.
"I view this as a major breakthrough," said Newton P.S. Merrill, a senior executive vice president at Bank of New York. "We're very excited about it."
Bank of New York has agreed to pay a relatively healthy 2.5 times Putnam's book value, and 15 times its 1994 earnings. But James Moynihan, a stock analyst with Advest Inc. in Boston, said the premium seemed worth it, given that Putnam's return on assets and return on equity have consistently ranked among the top quartile of its peers.
Putnam's board chose Bank of New York because of the price it offered and because it liked Bank of New York's management approach, Mr. Cassell said.
Mr. Merrill said Bank of New York plans to retain Putnam's current management and to employ its board of directors in an advisory capacity. No branch closings are expected. Mr. Cassell said it has not yet been decided if there would be any consolidations of Putnam's back-office operations with Bank of New York's.
Though Putnam is tiny compared with Bank of New York, its core business of catering to the super-wealthy could prove a good strategic fit, bank officials said.
Putnam has more than $2 billion of discretionary and non-discretionary personal trust assets. Bank of New York has about $23 billion of these assets, officials said.
They added that the Putnam acquisition would boost the revenues Bank of New York's personal trust and private banking businesses by nearly a tenth. Currently, these businesses constitute about a tenth of Bank of New York's total revenues.
Mr. Merrill added that Bank of New York could use Putnam as a springboard for other acquisitions in Connecticut, including possible purchases of branches spun off by Fleet in the wake of its acquisition of Shawmut National Corp.
Pending approval by regulators and shareholders of Putnam, Bank of New York will exchange 1.312 shares of its common stock for each Putnam share. Based on Bank of New York's closing price on Friday, the deal values each Putnam share at $42, just over its high so far this year of $41.
At midday Monday, Putnam stock was trading at $39.25, and Bank of New York at $31.87. Putnam's shares have surged more than a third since the beginning of the year on acquisition rumors. About half the rise has come since the bank disclosed earlier this month that it was reviewing several unsolicited offers.