People’s United Bank, based in Bridgeport, CT, is acquiring Danversbank in a transaction valued at $493 million through a combination of cash and stock. While regulatory approval is still pending, the deal is anticipated to move forward without significant obstacles. The local institution maintains branch locations on Broadway in Revere, in Linden Square, and on Broadway in Chelsea.
A decade ago, Danversbank entered the region by acquiring Revere Federal Savings Bank, which was previously led by Jim McCarthy—who continues in his role at Danversbank. Following the acquisition, the bank’s signage will change, though most customer-facing staff are expected to remain in place. Administrative and support positions may be eliminated due to redundancies with People’s United’s existing infrastructure.
Mark Panella, Danversbank’s chief financial officer, explained the likely staffing outcomes: “We would expect a lot of the customer facing people will survive the transaction, and that some of the backroom and administrative people will not survive because that infrastructure is already in place at People’s.” He added, “I will not survive the transaction, for example, just because there’s no need for two CFOs. That’s sort of how it goes in these things.”
People’s United has pursued an aggressive expansion strategy across Connecticut and other New England regions in recent years. The Danversbank purchase marks their entry into the Boston market. Jack Barnes, President and Chief Executive Officer of People’s United Financial, commented: “We are pleased that Danversbank has chosen to grow with People’s United Bank. Danversbank, combined with our existing Massachusetts presence, makes People’s United ─ New England’s largest independent bank ─ the seventh largest bank both in Massachusetts and in the Boston area. Danversbank is a high-quality commercial institution that offers an excellent platform for growth and is a natural extension of our brand. It complements our continuous footprint from Worcester, in central Massachusetts, through Boston and on into New Hampshire.” Barnes, who hails from Beverly, is familiar with the North Shore region.
The size disparity between the two institutions is substantial. People’s United commands approximately $25 billion in assets, while Danversbank holds $2.6 million in assets. As part of the agreement, Danversbank CEO Kevin Bottomley will assume a position on People’s United’s Board of Directors and believes the transaction will prove advantageous across the board.
Panella suggested that People’s United views Danversbank as a strategic entry point into Boston’s competitive banking sector. He noted that preserving experienced personnel would be essential for success: “We anticipate that we are, in effect, the platform for their real entrance of the Massachusetts market and, more importantly, the Greater Boston market because we have a large and extremely experienced cadre of commercial and industrial lenders. It’s really the commercial and industrial small business lending piece that is important. That can’t be successful for you if you let everyone go.”
Panella also emphasized that both institutions share similar philosophies regarding community banking. “The company’s that come in and acquire everything and then tear it apart don’t usually find success,” he stated. “We don’t believe People’s to be that type of company, especially since at the end of the day they’re a very large community bank…Even at $25 billion [in assets], People’s is big, but they’re not staggering.”
Despite Danversbank’s strong recent performance, marked by consistent client acquisition and growth, the sale proceeded because the institution operates as a publicly traded company obligated to consider attractive offers on behalf of shareholders. Panella explained that after 10 years as a public entity, the company loses certain protections against acquisition attempts. “We are beyond that three-year protection and we were compelled to listen and be good listeners,” he said. “If they offer a big number you can’t casually dismiss it. You are now owned by the shareholders. If you don’t want to be in that position, you don’t go public.”
Danversbank became a public company on January 9, 2008. The transaction structure calls for 55 percent stock and 45 percent cash consideration. Shareholders may choose between $23 per share in cash or 1.624 shares of People’s United stock per Danversbank share held. Stock received by Danversbank shareholders is anticipated to qualify for tax-free treatment. Closing is scheduled for the second quarter of 2011.