WSFS Financial in Wilmington, Del., has agreed to buy Beneficial Bancorp in Philadelphia.
The $7.1 billion-asset WSFS said in a press release Wednesday that it will pay $1.5 billion in cash and stock for the $5.7 billion-asset Beneficial. The deal, which is expected to close in the first quarter, priced Beneficial at 172% of its tangible book value.
WSFS said it plans to invest about $32 million over the next five years to improve technology and delivery systems to create a “top-tier physical and digital servicing platform.” The funds will come from expense cuts associated with the acquisition.
Beneficial has 72 branches, including 61 in the Philadelphia area. The deal is the 10th acquisition for WSFS since 2010, including banks and fee-based businesses.
“As a native Philadelphian and a lifelong resident of the Delaware Valley, I believe this combination provides a compelling opportunity to serve our combined markets as it fills a long-standing gap between big banks and smaller community banks in this market,” Mark Turner, chairman, president and CEO at WSFS, said in the release.
WSFS said it expects to close a quarter of the banks’ branches over the next 12 to 24 months.
The company said it plans to cut about 37% of Beneficial’s annual noninterest expense, largely by closing branches and reducing personnel costs. It also expects to incur $146 million in costs tied to the acquisition and the technology investments.
WSFS said it expects a $68 million benefit to its bottom line by 2021, with $12 million coming from tech enhancements. The deal should be immediately accretive to earnings per share at WSFS, excluding one-time expenses, and 8% accretive in 2021.
WSFS said it should take about four years to earn back the expected 4.3% dilution to its tangible book value.
“This partnership and our delivery transformation aligns with our strategic plan,” Rodger Levenson, chief operating officer at WSFS, said in the release.
The acquisition “creates the ideal opportunity to transform WSFS’ customer delivery and back office systems that will secure our competitive edge in a fast-changing financial services industry,” added Levenson, who is set to succeed Turner as president and CEO on Jan. 1.
WSFS said it will lose about $10.5 million in annual interchange fee revenue as a result of surpassing $10 billion in assets.
Gerard Cuddy, Beneficial’s president and CEO, would become vice chairman of WSFS Bank. Cuddy and two other Beneficial directors would join the WSFS board.
Boenning & Scattergood and Covington & Burling advised WSFS. Sandler O’Neill and Kilpatrick Townsend & Stockton advised Beneficial.