For 30 years the president of United Bank’s predecessor Rockland Bank, shareholder William McGurk has announced a potentially quixotic effort to stop Hartford-based United from being bought by Bridgeport-based People’s United Bank.
When William McGurk officially retired from his post as CEO and president of Rockville Bank and its holding company in 2011, he said his successor William Crawford came up to him at his retirement party and said, “This is what I want to do. I want to stay here until I retire and go out just like you did.”
Nearly two acquisitions later, the two have found themselves on opposite ends of a planned merger that would see People’s United Bank gobble up the Hartford, Connecticut-based United Bank in an all-stock transaction valued at $759 million. United acquired Rockville in 2014 and Crawford became CEO of the new entity.
McGurk, who is a shareholder in People’s United and United, has been outspoken about his disappointment in the deal. United shareholders are getting $14.74 per share when the stock was trading just above $14 per share before the acquisition was announced.
A High Standard to Meet
Despite being one of the largest private shareholders in United Bank, McGurk will face an uphill battle if he hopes to get enough votes among other shareholders to prevent the acquisition from happening.
“I’m not in favor and I’ve got my shares and am probably the largest individual shareholder, but I’m not up with the big boys on the institutional side,” McGurk told Banker & Tradesman. “I don’t think that they’re going to take as much interest in this as I might.”
For the deal to go through, United needs the holders of at least two-thirds of outstanding shares to vote in favor of it, according to United Bank Spokesperson Adam Jeamal, who declined further comment on the deal.
Institutional investors hold nearly two-thirds of the shares in United Bank’s parent company, making any effort to challenge the People’s United takeover difficult.
That will be a tough mark for McGurk to overcome.
Institutional investors such as Black Rock own 63 percent of United Financial Bankcorp’s stock, while individuals such as McGurk own 28 percent and hedge funds own 7 percent, according to Arthur Loomis, president of Loomis & Co., citing S&P Global Market Intelligence.
Loomis & Co. is a New York-based investment bank that works extensively with community banks in the Northeast on M&A and capital financings.
“Given the nature of the ownership distribution, the probability of success is probably fairly low at this point. This point may be mitigated, however, by the fact that the deal is 100 percent stock exchange, which institutional investors and hedge funds generally dislike, ceteris paribus,” Loomis said. “With disclosure of the deal in the shareholder proxy, and specifically the imputed value to insiders of the transaction, [McGurk] may pick up some support.”
Institutional Investors Will Decide
McGurk thinks he could convince plenty of individual shareholders to vote against the merger, as he says many have privately told him of their dismay with the deal and the loss of the bank.
He also said that the New England Regional Council of Carpenters, Local 43, which owns many shares in United, could potentially be against the acquisition as well. The union has not been happy with the board, according to McGurk, as it was not given any construction work when United built its new headquarters in downtown Hartford a few years ago.
Large institutional fund managers represent McGurk’s biggest obstacle. For them, the sale of a $7 billion-asset bank is small potatoes compared to other deals they work on.
“I think the institutional side is going to carry the day, and frankly, if I was an institutional investor, I would say, ‘Who the heck is this relatively little bank up there and who are these people,’” he said. “‘We don’t really care about them; we are big shots in New York, and we are going to move on. Let’s just sign off and get on to the next one.’”
William Crawford IV, left, and William McGurk in 2011. Image courtesy of Rockville Bank
Could Regulators Get Involved?
McGurk did say he might approach regulators about the deal.
Not only does he think that the change-of-control payouts for the United executives will be excessive, but he also wants to encourage regulators to make the bank seek an out-of-state acquirer, which might result in fewer layoffs and branch consolidation. According to McGurk, a bank in New York was interested in purchasing United.
Because they are in similar markets, United Bank and People’s United have a lot of branch overlap.
People’s United executives said on a conference call following the announcement of the acquisition that 61 percent of United’s branches are within 2 miles of a People’s United branch and 88 percent of United branches are within 5 miles.
The integration of the banks will likely result in quite a bit of branch consolidation and employee layoffs, as well as the elimination of back-office redundancies.
Bram Berkowitz
When People’s United acquired Farmington Bank last year, it closed 13 Farmington branches and Farmington Bank laid off a quarter of its workforce before the deal was complete.
Still, layoffs, branch consolidation and big executive payouts are nothing new in deals like this.
Cost savings are a big reason People’s United is likely doing the deal in the first place, and possibly one of the main reasons the bank was able to put in the winning offer.
“It’s a long shot,” McGurk said. “I realize that, and we’ll see what happens. I would like to see a little justice done for staff members that are liable to be laid off, and I think this is an unconscionable contractual deal.”
