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Provident New York To Merge With Sterling Bancorp In $344 Mln Stock Deal

4/4/2013 8:18 AM ET

Financial services firm Provident New York Bancorp (PBNY: Quote) on Thursday said it has entered into a definitive agreement with Sterling Bancorp (STL: Quote) to merge in a stock-for-stock deal valued at $344 million. The merger is expected to create a premier New York metro banking franchise.

In the merger, each Sterling shareholder will receive a fixed ratio of 1.2625 shares of Provident stock, based on the closing price of Provident stock on April 3. Upon closing, Provident Bank will convert to a national bank charter, with brand name as Sterling National Bank, as will the holding company.

Provident expects the merger to be accretive to its earnings per share in 2014, excluding the impact of the potential revenue enhancement opportunities. It would also generate approximately $34 million in fully phased-in annual cost savings or approximately 18 percent of the expected combined expense total.

Upon closing, Provident shareholders will own approximately 53 percent of stock in the combined company, while Sterling shareholders will own the remaining about 47 percent.

The transaction has been approved by the boards of directors of both companies. The deal would close in the fourth calendar quarter of 2013, subject to approval by shareholders from both companies, regulatory approval and other customary closing conditions.

On a combined basis, the companies had annualized pro forma revenue of $257 million and net income of $41 million for the 2012 calendar year. Upon completion of the merger, the new entity will have nearly $7 billion in assets.

Provident said it expects to raise $80 million through a debt offering prior to the closing of the deal and anticipates using the net proceeds to fund a capital contribution to Provident Bank, redeem Sterling's trust preferred securities and for general corporate purposes.

In addition, Provident currently intends to increase its regular quarterly cash dividend to $0.07 per share, beginning with the first dividend payment after closing and subject to board approval.

In the new entity, Provident President and Chief Executive Officer Jack Kopnisky will serve as CEO, and Luis Massiani will serve as chief financial officer. Louis Cappelli, Sterling's chairman and chief executive officer, will serve as chairman of the board of directors.

The Board of Directors of the combined company would have 13 members at closing, with seven members from Provident and six from Sterling directors.

Provident President and CEO Jack Kopnisky said, "This merger is a tremendous opportunity for Provident and a significant step in our strategy to expand within the greater New York metropolitan area. The combined business will be a more effective competitor in the marketplace than either company on its own."

Regarding the intended name change, Kopnisky said, "Sterling's name is highly respected and allows us to grow beyond our combined footprint. The Provident name has served us well, but has limited our growth in New Jersey. Adopting the Sterling name will enable us to extend our brand to a broader regional market."

In the transaction, Bank of America Merrill Lynch and Credit Suisse Securities (USA) LLC served as financial advisors to Provident.

J.P. Morgan Securities LLC and Keefe Bruyette & Woods, a Stifel Company, served as financial advisors to Sterling.

On Wednesday, Provident shares closed trading at $8.81, up $0.03 or 0.34 percent, and Sterling Bancorp shares settled at $10, up $0.05 or 0.50 percent.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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