The bidding war over CNB Financial Corp. in Worcester, Mass., has a winner.
United Financial Bancorp Inc. said late Thursday that it agreed to buy CNB for $25 million, beating out two other suitors.
The price is about 16% higher than Berkshire Hills Bancorp Inc. would have paid under a deal it had to buy CNB.
But Richard B. Collins, the president and chief executive officer of the $1.2 billion-asset United, said CNB is worth the extra money.
It has six branches in one of the most populous cities in New England and an impressive team that can help fuel commercial loan growth, Collins said. And with $297 million of assets, CNB is just the right size.
"They're not a huge bank, but they're big enough to make a difference for us," Collins said.
Berkshire, of Pittsfield, Mass., agreed to let CNB go.
Though it did not return a call seeking comment, Berkshire, which announced in April that it would buy CNB, said in a press release late Thursday that it received a $970,000 breakup fee after agreeing to terminate the deal.
That deal had sparked the sudden flurry of interest in CNB. United and another, unidentified company put in higher offers.
Mark Fitzgibbon, the head of research at Sandler O'Neill & Partners LP, said unsolicited bidders rarely succeed in breaking up a deal, so United's win was surprising.
But Fitzgibbon, who covers the $2.7 billion-asset Berkshire, said it did not exactly lose in this case, given the hefty consolation it received. "You can think of it this way: It's the best deal they ever did. They made $970,000 for a couple of weeks' work," he said.
Collins said he had been after CNB for about three years. United even made an offer to buy it in December. But after doing due diligence, United lowered its initial price, and CNB rejected the deal.
"At the time bank stocks were tumbling all across the country and the economy appeared to be nose-diving," Collins said. "They told us if we couldn't do $12.75 a share, we had nothing to talk about. So we broke off the discussions."
When CNB agreed to sell to Berkshire for $19.5 million in stock, or $8.50 a share, he said, "We realized we were willing to pay more. So that's why we jumped back in."
After United offered $10 a share, Berkshire raised its price to $9.23 a share, and CNB reaffirmed the deal.
But then United offered $10.25 a share. Berkshire held steady and CNB began talks with United, which ultimately agreed to a final price of $10.50 a share in cash and stock.
Charles Valade, CNB's president and CEO, said he has worked with Collins twice before at Worcester banks that are now absorbed into larger companies and he expects the integration to go smoothly.
"Dick, having worked in Worcester for 20 years, knows the marketplace, so there is a high degree of comfort," said Valade, who would become an executive vice president at the buyer's United Bank. "Many of the customers we have knew Dick from our previous banks."
The deal is expected to close in the fourth quarter. United said the price equates to 125% of CNB's tangible book value and a 3.8% premium on its core deposits.
Mike Shafir, an analyst at Sterne Agee & Leach Inc. who follows both United and Berkshire, said geographically and culturally CNB is a good fit for United.
But, he added, United estimates 9% accretion to its earnings per share next year from CNB, and the stock dilution from the deal would nearly wipe out that gain. "From a numbers standpoint, it's a wash," he said.
This is United's first deal since going public.
A former mutual thrift, United, of West Springfield, Mass., completed the second step of its conversion in December 2007, raising about $85 million.
Collins said buying CNB would allow his company to put some of that money to work, but still leave it "extremely" well capitalized.
He said it would remain alert for other potential acquisitions, but also aims to grow organically.
Fitzgibbon said though Berkshire is eager to expand into Worcester, he understands why it opted to stick with a lower price on CNB.
"At $8.50, it was an outstanding transaction for them," he said. "I think at these levels it makes sense for them to walk away from it."
