Chittenden Corp. in Burlington, Vt., is expanding in Maine with its first deal in four years.
The $6.4 billion-asset banking company announced Friday that it had agreed to pay $111.4 million in cash and stock for Merrill Merchants Bancshares Inc. in Bangor.
The seller's Merrill Merchants Bank has $449 million of assets, $360 million of deposits, and 11 branches.
It would become the sixth bank owned by Chittenden, which has 125 branches in Vermont, Maine, Massachusetts, and New Hampshire.
"We think it's a terrific company that we've known for many years," Paul A. Perrault, Chittenden's chairman, president, and chief executive officer, said Friday. "It happens to be an operating model and a culture that is very much like our own."
Pricing did not deter Chittenden from making deals in recent years, he said. Rather, the challenge was to find "like-minded" companies that were a good fit culturally and strategically, he said.
"These are not moves by us to cover certain geographies or gain market share or anything like that. It really is financially driven," Mr. Perrault said.
For instance, he said, Chittenden has the capital to help Merrill expand and handle larger relationships.
Chris Stulpin of Cohen Brothers & Co. called the price "fair" and said the deal would help Chittenden reach its goal of increasing earnings by 10% annually.
Collyn B. Gilbert at BankAtlantic Bancorp. Inc.'s Ryan Beck & Co. said Merrill's trust business should benefit from Chittenden's wealth management services. Bangor is a business hub for the northern two-thirds of Maine, she said, and this fits well with Chittenden's small-business focus.
Chittenden already owns two other banks with branches in the state, Maine Bank and Trust Co. in Portland and Ocean National Bank in Portsmouth, N.H.
There is no overlap with Merrill's branches, which are several hours' driving time northeast of the existing Chittenden markets, said Edwin Clift, Merrill's chairman and CEO.
As with other acquired banks, Merrill would become a unit of Chittenden and continue operating under its own name and senior management team.
Mr. Clift said this arrangement was among the reasons Merrill chose to sell itself to Chittenden. "I really like their model, with the multibank holding company and each bank having autonomy in its market area," he said. Mr. Clift, 67, said he plans to stay with the company.
Merrill is performing well despite the tough operating environment, he said, and it had not been looking for a buyer. It reported Friday that its net income rose 10% last year, to $6.3 million, or $1.76 a share. It had a return on equity of 17.32% and a return on assets of 1.45% for the year.
Mr. Clift said the deal came about because the two companies are a good fit and the executives at Merrill and Chittenden have known each other for years. "It's a conversation that we've had ongoing for quite some time," he said.
The deal is expected to close in the second quarter. The price works out to 286% of the seller's tangible book value and is a 20% premium to deposits, Ms. Gilbert said.
Chittenden last announced a deal in November 2002, when it agreed to pay $247 million in cash and stock for one of New Hampshire's largest banking companies, the $1.1 billion-asset Granite State Bankshares Inc.
Mr. Perrault skirted a question about whether the current operating environment might present more opportunities for Chittenden to do deals. "There are always conversations that go on among banks," he said. "Maybe there'll be a stretch again where there are no transactions, maybe not."
