Peoples Heritage Financial Corp., Portland, Maine, has agreed to divest three branches to win Justice Department approval of its deal for CFX Corp., Keene, N.H.
As part of its settlement with the agency, $6.8 billion-asset Peoples Heritage has agreed to divest itself of $124.8 million of deposits in three branches in two New Hampshire cities, Concord and Hillsborough, where it already has branches.
In addition, the Federal Reserve is expected to require two Manchester, N.H., branches with a combined total of $51 million of deposits to be divested, according to sources at the Justice Department and Peoples Heritage.
On Oct. 27, Peoples Heritage said it would buy $2.9 billion-asset CFX for $703 million in stock, or 2.8 times book value. The deal would move Peoples Heritage to first from third in market share among New Hampshire banks.
The deal, which still must be approved by the Fed, the Office of Thrift Supervision, and the Federal Deposit Insurance Corp., is expected to close in early April.
"It is encouraging to hear from one of the agencies," said Brian Arsenault, a Peoples Heritage spokesman.
The settlement resolves the Justice Department's concern that the merger would lessen competition for banking services in New Hampshire.
In a statement, Joel Klein, assistant attorney general in charge of the antitrust division, said the branch sales will ensure a fair playing field.
"This divestiture ensures that small businesses and other consumers will continue to receive the most competitive loan rates and best banking services," Mr. Klein said.
Peoples Heritage is the holding company for three banks with a combined 140 branches in Maine, New Hampshire, and Massachusetts. CFX Corp. also has three bank affiliates, which operate 57 branches in New Hampshire and Massachusetts.
The shareholders of both companies approved the deal Feb. 9. Under the deal, each CFX share will be converted into 0.667 share of Peoples Heritage stock.
CFX's New Hampshire banks will become part of the Peoples Heritage affiliate Bank of New Hampshire, and CFX's bank in Massachusetts will become part of the Peoples Heritage affiliate Family Bank, Haverhill, Mass.