A dramatic bidding war on Cape Cod came to a head Tuesday when Sandwich (Mass.) Bancorp accepted a greatly sweetened, $123 million offer from CompassBank.
CompassBank, based in New Bedford, Mass., boosted its earlier bid by $11 per share, to $64, and pledged to pay in stock rather than cash.
The deal apparently ends an eight-week saga that, at one point, had four bidders vying for the $519 million-asset thrift. Experts viewed it as one of the most contentious community-bank auctions in the country.
In theory, one of the losing bidders could now launch a tender offer, appealing directly to Sandwich's shareholders. But observers consider that unlikely.
The deal, valued at more than three times Sandwich's book value, would create the Bay State's third-largest savings bank, with more than $1.6 billion of assets.
"Our board of directors is confident that CompassBank's new agreement will greatly benefit Sandwich Bancorp shareholders," said Frederic C. Legate, president and chief executive officer at Sandwich. He added that no branches would be closed under the merger, which is expected to be completed in the fourth quarter.
News of the proposed deal sent Sandwich's stock to new highs. In Nasdaq trading Tuesday, the stock rose $5.375, closing at a record $63.625
Some investors have profited handsomely from the episode.
"I couldn't be happier," said Bernard J. Doherty, senior vice president at Josephthal & Co. in Boston. Mr. Doherty bought 50,000 shares of Sandwich stock last month-when the stock was trading at $53.
Sandwich and Compass first agreed to merge on Feb. 2, when Compass offered $110 million in cash for 112-year-old Sandwich.
Privately held Compass, founded in 1855, had planned to finance the deal by selling 49% of its stock to the public in a mutual-to-stock conversion. But that deal was imperiled when Cape Cod Bank and Trust Co. made an unsolicited $115 million offer on Feb. 17. Days later, Firstfed America Bancorp in Fall River, Mass., and Independent Bank Corp. in Rockland, Mass., submitted offers as well, triggering a fierce bidding war.
All four bidders were drawn by Sandwich's geographic market, which would be a natural extension of their own.
Initially, CompassBank balked at boosting its offer. While CompassBank's bid was not as high as the others, president Kevin G. Champagne argued that it was better because Sandwich shareholders would be paid in cash. The other offers were mainly stock deals.
But Dana Briggs, senior vice president at Sandwich, said that some shareholders would prefer stock because of tax considerations.
"A stock-for-stock exchange is tax-free for as long as the shareholder holds the stock," Mr. Briggs said. "On a cash buyout it becomes immediately taxable."
Under terms of the revised deal, CompassBank plans to convert completely to a publicly owned company. In an interview Tuesday, Mr. Champagne said his board considered offering more cash but decided it made more sense to go public.
"We found that it would have been irresponsible to push a cash offer to that level," he said. "We would have been giving up close to $125 million and the earnings on it."
Not that the board didn't struggle with the decision. CompassBank, after all has been privately held for more than 140 years.
"When faced with the ultimate decision," Mr. Champagne said, "the fact of the matter is we just couldn't stay where we were."