Continuing with an acquisition strategy designed to make it a top contender in New England, Citizens Financial Group announced an agreement Monday to buy UST Corp. of Boston for $1.4 billion.

This cash deal, combined with Citizens' recent pact to purchase $2.2 billion of commercial loans and $1.6 billion of deposits from Boston-based State Street Corp., would give Citizens $28 billion of assets, $19.5 billion of deposits, and 370 branches in Connecticut, Rhode Island, Massachusetts, and New Hampshire.

"We've proven ourselves to be a company that takes advantage of opportunities," said Citizens chairman and chief executive officer Lawrence K. Fish. After these transactions are completed, "we will really be in a dominant position," he added in a telephone interview Monday.

Providence, R.I.-based Citizens has been trying to capitalize on fallout from the pending $16 billion merger of Fleet Financial Group and BankBoston Corp. Once its pending deals are completed, Mr. Fish asserted, Citizens would be a viable competitor of the resulting $180 billion-asset Fleet Boston Corp.

UST would also fill a void for Citizens in Massachusetts, particularly in the affluent markets north and west of Boston, Mr. Fish said.

In addition, UST brings a strong small-business and middle-market lending operation, and trust and asset management capabilities, according to analysts.

Mr. Fish said his priorities would now turn south toward Connecticut. Citizens already has a commanding presence in New London, New Haven, and other Connecticut markets, but it lacks a sizable presence in the central and southwestern areas of the state, he said.

He added that he would not rule out bidding for deposits and branches divested by Fleet or BankBoston, but suggested that the urgency to be among the winning bidders has abated somewhat.

The deals with State Street and UST "are two milestone events," Mr. Fish said. "We could consider the divestitures. We'll just have to wait to see what happens."

Analysts and investment bankers said many smaller New England banking companies believe they are unlikely to win the divested properties against out-of-state companies such as BankAmerica Corp., First Union Corp., or Citigroup.

Massachusetts politicians and regulators have been pushing for a divestiture to one large out-of-region bank that could stand as a viable competitor of Fleet Boston Corp.

Citizens' agreement for UST "is in anticipation of the winner of the Fleet-Boston sweepstakes," said John Carusone, president of Bank Analysis Center, a Hartford, Conn.-based investment banking firm.

"There is a feeling out there that a large, out-of-region player is going to win," Mr. Carusone said. "Banks like Citizens are now looking at other ways to muscle up in the markets."

In Massachusetts, where Citizens has placed a great emphasis on growth in recent years, the UST and State Street acquisitions would almost double the company's assets, to $14 billion.

"This makes them a formidable force in commercial banking, particularly in small-business and middle-market lending," said Gerard Cassidy, an analyst at Tucker Cleary Inc., Portland, Maine.

For UST, itself an active acquirer over the last few years, the Fleet- BankBoston combination forced a strategic assessment, particularly on the assumption that the divestitures would likely go to a larger competitor.

"The shape of business in this marketplace was going to change very quickly," said UST president and chief executive officer Neal F. Finnegan. He is to join Citizens Bank of Massachusetts as nonexecutive chairman and the holding company as a member of the board. "We were caught in a size predicament," he said.

The UST deal, which is slated to close in the first quarter, amounts to $32 per Citizens share, 2.6 times book value and 16.4 times projected 2000 earnings. Citizens also has an option to acquire up to 19.9% of newly issued UST shares.

About 800 positions, or 13% of the combined work force of 6,000, may be eliminated, though Mr. Fish said many of those employees could find jobs elsewhere in the new company.

The two banks also have up to 40 overlapping branches, some of which may be consolidated or sold, Mr. Fish said. The companies said they expect to achieve cost savings up to $80 million over the next 18 months.

UST's asset management arm, United States Trust Co. (no relation to its namesake in New York), and its brokerage, Brewer & Lord, are to continue to operate autonomously after the deal is completed.

Goldman, Sachs & Co. advised Citizens. Fox-Pitt, Kelton advised UST.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.