First Niagara Financial Group, Inc. (FNFG) Thursday announced a merger deal with NewAlliance Bancshares, Inc. (NAL) to combine NewAlliance with First Niagara in a cash-and-stock transaction valued at $1.5 billion, including transaction expenses. The boards of both companies have unanimously approved the transaction, which is expected to close early in the second quarter of 2011.
Under the deal terms, each NewAlliance stockholder will receive either 1.10 shares of First Niagara stock, or cash, or a combination. The cash price will remain fixed while the value of the stock consideration will likely change prior to closing due to fluctuations in the price of First Niagara stock. Of the aggregate consideration, 86% would be in stock and 14% would in cash.
Based on yesterday's closing share price, the approximate blended value of the stock and cash consideration is $14.09 per share. This price represents a premium of about 24% based on NewAlliance's closing price of $11.36 and a premium of about 19% over NewAlliance's 52-week average closing price on August 18.
First Niagara expects the transaction to be accretive to its diluted earnings per share excluding transaction expenses in 2011 and accretive by about 4% to 5% in 2012, the first full year of ownership.
New Haven, Connecticut-based NewAlliance has $8.7 billion in assets, including $4.9 billion in loans and $5.1 billion in deposits. The bank has 88 branches, serving eight counties from Greenwich, Connecticut to Springfield, Massachusetts with a workforce of about 1,200 employees. In the second quarter, the company's profit surged 61% to $16.27 million or $0.16 per share, aided by a 13% growth in revenues to $73.6 million.
Buffalo-based First Niagara serves communities across Upstate New York, Western Pennsylvania including Pittsburgh, and Eastern Pennsylvania from the Philadelphia suburbs to Allentown, Pennsylvania. For the recently closed second quarter, First Niagara higher earned $20 million or $0.10 per share, with net interest income totaling $154.8 million and non interest income reaching $46.1 million.
The merger is expected to create a top-25 U.S. bank by assets. On a pro forma basis, as of June 30, 2010, the combined bank will have more than $29 billion in assets, including over $14 billion in loans, as well as $18 billion in deposits. The combined entity will also have over 340 branches in New York, Pennsylvania, Connecticut and Massachusetts.
Further, NewAlliance's competitive position, team and branch network could help First Niagara's growth in New England. NewAlliance's all 88 branches would be converted and rebranded as First Niagara locations.
"As importantly, our shareholders now own more than 30% of a combined regional banking powerhouse," NewAlliance Chairman, President and Chief Executive Officer Peyton Patterson said.
"We are thrilled to bring on such a seasoned leadership team, and we know they have what it takes to help us build out our New England Region. A top priority for Peyton and me is to map out specific roles for them in the newly combined organization," said John Koelmel, First Niagara's President and Chief Executive Officer.
First Niagara also said that three NewAlliance directors will be named in the coming months and they will join the board of First Niagara at transaction closing. This addition will raise the total number of directors to 12 from nine.
FNFG is trading at $12.14, down $0.64 or 5.01%, on a volume of 6.64 million shares.
NAL rose 13.91% or $1.58 and is trading at $12.94 on the NYSE, on a volume of 3.51 million shares.
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