Michael Daly of Berkshire Hills Bancorp knows how to play hardball.
Daly, the Pittsfield, Mass., company's president and chief executive, on at least three occasions flexed his bargaining muscle in negotiations to buy Hampden Bancorp in Springfield, Mass. By and large, he prevailed, according to a Wednesday regulatory filing tied to the $109 million acquisition.
The pressure began on Oct. 21, when Daly invited Glenn Welch, Hampden's president and chief executive, to meet. Daly indicated an interest in an all-stock acquisition of the $706 million-asset Hampden, though he asserted that Berkshire Hills "would not participate in an auction process."
Hampden, meanwhile, was facing pressure from Clover Partners, an activist investor that had already tried and failed to take two board seats. Clover, seemingly intent on forcing Hampden to sell itself, had already given notice that it planned a second proxy battle. Hampden disclosed in Wednesday's filing that its board feared it would lose the new battle to Clover.
So Hampden, with the assistance of Sterne Agee & Leach, began working on a deal with Daly. Berkshire Hills initially proposed on Oct. 24 to pay 0.84 of its own shares for each share of Hampden. But Daly lowered the exchange ratio to 0.80 a week later, citing concerns that the combined bank would not be able to cut costs enough to justify the higher price.
Berkshire Hills "indicated that it would not move from the 0.80 exchange ratio and was prepared to walk away from the deal," the filing said.
Welch and Daly finally settled on a 0.81 exchange ratio, a valuation clearly in line with Daly's expectations.
The deal hit another snag, however, when Berkshire Hills began negotiating new employment contracts with several top Hampden executives. Robert Massey, Hampden's chief operations officer; Sheryl Shinn, senior vice president of information technology and operations; and Robert Michel, senior vice president and division executive of retail and mortgage lending all refused to enter into new employment agreements. They also refused to sign agreements agreeing to vote in favor of the merger.
Massey is entitled to severance benefits valued at $593,000, while Shinn is in line to receive $214,000 in benefits, the filing said. Berkshire Hills is obligated to pay Michel severance benefits valued at $972,000.
The bigger hurdle involved Luke Kettles, Hampden's chief lending officer. Berkshire Hills refused to sign the merger agreement until Kettles agreed to modify the terms of his employment agreement, including severance. Daly and Kettles finally reached an agreement on the terms of Kettles' employment, though the filing did not detail specific changes.
Berkshire Hills and Hampden announced the deal on Nov. 4.