Webster Financial Corp. agreed Friday to buy People's Savings Financial Corp. of neighboring New Britain for $67.5 million of stock.
The deal for $482 million-asset People's is expected to bolster Webster's business against competition from big out-of-state banks.
Webster, a $5.9 billion-asset thrift, has 78 branches. With the acquisition it would add nine branches and a trust business that manages $327 million. The company said it would take an after-tax charge of $5 million when the deal closes, which is expected to be in the third quarter.
Webster will pay $34 in stock for each People's share, about 5.9% higher than People's Thursday closing price, 1.4 times its book value, and 16.8 times 1996 earnings.
The transaction stands as long as Webster's stock trades between $32 and $40; People's can terminate the transaction if Webster's average closing price falls below $32. Webster shares fell 62.5 cents, to $34.875, in midday trading, while People's was unchanged at $32.
"It's definitely a good move," said Advest Inc. analyst Sal DiMartino. "Not only are they acquiring a strong retail franchise, they pick up People's trust and investment management business."
In recent years, First Union Corp., Fleet Financial Group, and Bank of Boston Corp. have entered Connecticut through acquisitions.
- Joseph A. Giannone, Bloomberg News Service