Fleet Financial Group moved to build its Massachusetts market share on Monday by agreeing to acquire NBB Bancorp, the parent of New Bedford Institution for Savings, for $420 million in cash and stock.
The purchase will boost Fleet's share of deposits dramatically in Bristol County, Mass., and will add to its existing branch networks on Cape Cod and in Rhode Island.
Providence, R.I.-based Fleet Financial has $46 billion in assets, including $8.1 billion in Massachusetts. NBB has $2.5 billion in assets.
Fleet's bid apparently disappointed the stock market, which knocked $2.125, or 4.4%, off NBB's price, to $46. Fleet was off 25 cents to $36.625.
1.7 Times Book Value
Fleet Financial said it would pay $48.50 a share, half in stock and half in cash - a premium equal to 1.7 times the New Bedford-based thrift's tangible book value.
As a sweetner, NBB shareholders will also receive warrants for 2.5 million Fleet shares. Fleet will give 0.277 warrant for each NBB share, with a strike price of $43.88 and a term of six years, exercisable one year after closing. The deal is expected to be completed early next year. Analysts viewed the price as reasonable, given NBB's strong asset quality and capital position.
"You're down to a fairly small set of acquisition prospects in New England," said Nancy Bush of Brown Brothers Harriman in New York. "As we've seen over the last year, they don't come cheap."
Fleet agreed last October to poay $125 million, or 1.87 times book, for Waltham, Mass.-based Sterling Bancshares. In March, Shawmut National Corp. agreed to buy West Newton Savings Bank for $45.5 million, 1.8 times book value.
Expense Reduction
NBB has 52 offices. Fleet said it would reduce the thrift's expenses by 40%, partially by consolidating 18 branches that overlap with its own. The cost savings, according to Fleet, will help increase its earnings by several cents a share in 1995 and thereafter.
Executive vice president of consumer banking Dennis M. Murphy said the transaction would boost Fleet's share of deposits in Bristol County from 1% to a dominant 24%. He said Fleet expects to cross-sell additional products such as credit cards, mutual funds, and trust services to NBB's retail customers.
Fleet will also target small-business clients with its "Easy Business Banking" product, a package of cash management, trade credit, and other services.
"The fit with Fleet is going to be tremendous. And I think we're going to be able to add some significant value to the customer base," Mr. Murphy said.
Profits Up 22%
The well-capitalized NBB earned $7.8 million in the first quarter, up 22% from a year ago. The thrift's return on assets reached a banklike 1.29%, higher than Fleet's 1.10% for the same period. Nonperforming loans decreased to 0.99% of total loans from 1.97%, and Tier 1 capital climbed to 19.69% from 16.88%.
Fleet said it would repurchase six million shares for issurance to NBB holders, funding that repurchase and the cash portion of the deal through the issuance of term debt.
