Continuing its expansion through New England, Peoples Heritage Financial Group of Portland, Maine, said Monday that it agreed to buy SIS Bancorp of Springfield, Mass., for $428 million in stock.
At a price equal to 3.13 times SIS' book value and 21.4 times estimated 1999 earnings, Peoples would nearly double its assets in Massachusetts and gain its first eight branches in Connecticut.
SIS' $1.8 billion of assets would bring Peoples Heritage up to about $12 billion.
William J. Ryan, chairman, president, and chief executive officer of Peoples Heritage, said the deal "fills a very important market for us.
"Massachusetts has done very well," he said in a conference call with analysts. "We have been able to add substantially to our presence there over the past two years."
Each SIS share would be exchanged for 2.25 shares of Peoples Heritage stock- worth$57.23 at Friday's close. The acquirer plans to issue 16.8 million common shares to complete the transaction, which it expects to close by yearend.
Peoples Heritage closed Monday at $24.3125, down $1.125, while SIS rose $7.625, to $52.625.
"It looks like an excellent match," said James Ackor, analyst with Tucker Anthony Inc. in Portland. "It's a steep price, but we believe Peoples, based on its track record, can make it work."
Peoples Heritage operates 194 branches through three subsidiaries. Peoples Heritage Bank holds the top market position in Maine, and its Bank of New Hampshire affiliate is the market-share leader in the Granite State.
When brought into Peoples Heritage, SIS' Springfield Institution for Savings and Glastonbury Bank and Trust Co. would retain their names. F. William Marshall would remain president and CEO of the two banks and become vice chairman of Peoples.
Peoples Heritage has been an active acquirer of community banks over the past six years, growing from $2.3 billion of assets in 1992. In April it bought CFX Corp. of Keene, N.H., for $793 million in stock.
The purchase of SIS would increase the number of Peoples' branches in Massachusetts by 25, to 56, and boost its market-share standing in the state to No. 8, from No. 10.
Kevin T. Timmons, analyst with First Albany Corp. in Albany, N.Y., said that because Peoples Heritage already has a commanding market share in Maine and New Hampshire, it needed to look elsewhere.
"If they want to grow at all, they have to do it in other states," he said. "And if you are going to grow in other states, Massachusetts, with the strongest economy, is the logical place to do it."
Mr. Ryan said the company is still looking for other deals in New England.
"We want to continue to grow in Maine, New Hampshire, and Massachusetts, but we will certainly look at Connecticut, Vermont, and maybe even upstate New York," Mr. Ryan said. He said no bank is too small to buy, but he would probably concentrate on companies with about $1 billion of assets.
Peoples Heritage "regularly" receives calls from New England community banks interested in being acquired, Mr. Ryan said, adding that "we have turned away more opportunities than we have struck deals for."
"This is just another step toward long-term consolidation in the region," Mr. Timmons said. "It shows that even a bank like SIS, which I thought had a decent prospect for independent growth, can elect to sell out."