Bank of Boston Corp. announced Wednesday that it had agreed to acquire Multibank Financial Corp., a recovering banking company in a Boston suburb, for about $197 million in stock.
The deal would expand Bank of Boston's branch network in Massachusetts by 64% to 193 and give it a much stronger presence in the Berkshire and Cape Cod regions. Multibank has $2.5 billion in assets.
The announcement came just nine days after Bank of Boston announced it would acquire Society for Savings Bancorp for about $195 million in stock. Hartford-based Society has $2.8 billion in assets.
Betting on a Turnabout
Bank of Boston, with $32.3 billion in assets, is betting heavily that bad loans at Society and Multibank have peaked. The price tag for Society equals 1.3 times book value, and 1.2 times book value for Multibank.
Analysts said both were healthy prices for institutions that are still in recovery mode.
Multibank's stock rose $3.25 to $19.50 on the news. Bank of Boston's stock meanwhile fell 62.5 cents to $19.
Multibank would give Bank of Boston's consumer business a much-needed boost. Consumer loans represent only 15% of Bank of Boston's total loans and, with corporate lending expected to be sluggish, the company is looking to grow that end of the business.
Multibank "beautifully fills out our Massachusetts franchise," said Peter J. Manning, Bank of Boston's chief financial officer. "It gets us into some cities where we're not and where we need to be."
In the Berkshire County area in the western part of the state and in the suburbs south and west of Boston, the addition of Dedham-based Multibank would be particularly important.
Bank of Boston, which has 118 branches statewide, has little or no presence in these areas.
Multibank earned $1.8 million in the first half of this year after reporting a $15.2 million loss in 1991 and $21.3 million loss in 1990.
Profits on Track
Bank of Boston has been in recovery mode as well. It earned $119.2 million in the first six months of this year and has posted four straight quarters of profits.
Bank of Boston expects to achieve about $30 million in cost savings from its acquisition of Multibank. The company said the deal would probably dilute per-share earnings by about 5% next year. The deal is subject to financial reviews and regulatory approvals.
For Multibank, the deal confirms what analysts have been saying for some time: That it was due to be acquired. The recession has weakened it considerably; and its two senior executives, David B. Lynch and Selwyn I. Atherton, are over 60 years old.
Speculation intensified this summer when the board's choice to succeed Mr. Lynch as chief executive died before assuming his duties.
Mr. Lynch said he advised the board to take Bank of Boston's offer because he didn't think the company would recover fast enough to justify staying independent.
On the basis of Wednesday's close, Multibank's shareholders would receive $21.375 for each of their shares. They haven't seen prices like that in more than two and a half years. Instead they have seen their their stock fall below $4 a share.
The purchase price is based on an exchange ratio of 1.125 shares of Bank of Boston stock for each share of Multibank.
Mr. Manning would not say whether there would be branch closings or layoffs as a result of the transaction. Multibank has 1,400 employees.Multibank FinancialAt a GlanceHeadquarters: Dedham, Mass.Assets: $2.5 billionDeposits: $2.2 billionSubsidiarybanks: 5Branches: 75Source: Company reports