Greater Community Bancorp's deal to sell itself to Oritani Financial Corp. had left investors in both companies so dissatisfied that executives feared it might fail to win shareholder approval.
So when Valley National Bancorp of Wayne, N.J., swooped in with an offer to buy Greater Community for $167 million in stock, all sides called it a happy ending.
"In a sense, we were like a white knight," Gerald H. Lipkin, Valley National's chairman, president, and chief executive officer, said in an interview Thursday. "It wasn't like we came in here to do a hostile breakup of that other deal."
The $12.7 billion-asset Valley National announced its deal for the $976 million-asset Greater Community, of Totowa, late Wednesday — within minutes of announcements from Oritani and Greater Community that they had mutually agreed to call off their deal.
"It just wasn't the right time and place for this transaction," Kevin J. Lynch, Oritani's chairman, president, and CEO, said in an interview. "Market forces overtook us."
Now that its deal is off, Oritani will focus on organic growth and capital management, Mr. Lynch said. The Washington Township company's stock had fallen 27% since that deal was announced Nov. 13, including a 13% drop that day. On news of the deal's termination, Oritani's shares spiked 17.6% Thursday, to close at $14.65.
"This is the best-case scenario for Oritani shareholders," said Mike Shafir, an analyst at Sterne, Agee & Leach Inc.
The $1.3 billion-asset Oritani is a mutual holding company with only 30% of its stock publicly traded.
Investors punished its stock because the Greater Community deal would have diluted its projected tangible book value in the event of a full conversion, according to Mr. Shafir, who upgraded Oritani's stock Thursday to "buy," from "hold," after its deal was called off.
Though Oritani had agreed to pay $187 million in cash and stock, the deal's value fell along with Oritani's stock price, riling Greater Community shareholders.
John L. Soldoveri, Greater Community's former chairman and CEO, who owns about 10% of its stock, had campaigned to block its sale to Oritani. However, Mr. Soldoveri, who also owns Valley National stock, supports the new deal, Mr. Lipkin said.
Anthony M. Bruno, Greater Community's chairman, president, and CEO, said in an interview that the shareholder opposition to Oritani factored into the decision to team up with Valley National. They objected to the deal with Oritani because it is a thrift, it does not pay a dividend, and since less than a third of its shares are traded publicly, investors' influence is minimal, he said.
"At the end of the day, we really want our shareholders to be happy," Mr. Bruno said.
According to Mr. Lipkin, Valley National, which had pursued Greater Community for years, was asked about its interest by a third party acting on behalf of Oritani and jumped at the opportunity.
"It was a company that we had a strong interest in," he said.
Analysts applauded the new deal as a good fit for Valley National, citing Greater Community's commercial lending focus and pristine asset quality.
In addition, Valley National would gain 16 branches in Bergen, Passaic, and Morris counties, increasing its deposit share in those markets.
It is paying $19.17 for each Greater Community share, or a 25% premium over Wednesday's closing price.
Greater Community's stock jumped 19% Thursday, to close at $18.15. Valley's shares slipped 0.6%, to $19.84.
The price works out to 2.65 times the seller's tangible book value and 18 times its earnings over the last 12 months.
The deal is expected to close in the third quarter, and Valley National anticipates that the transaction will be accretive to earnings within the first full year after that. It expects to cut more than 30% of Greater Community's noninterest expenses.
Greater Community would be the 21st banking company Valley National has bought in the past 22 years, but its first since 2005. Valley National would like to do more deals, Mr. Lipkin said, but it is picky.
"We are very restrictive as to what we will buy, because we don't want companies that have credit problems," he said. "We cherish the condition of our balance sheet."
