Berkshire Hills Bancorp Inc. has announced plans to acquire a New York bank, in a move it said will further expand its footprint in the Empire state.
Berkshire will acquire Rome Bancorp Inc. and its subsidiary, The Rome Savings Bank, in a transaction valued at approximately $74 million.
Rome’s assets totaled $330 million at June 30, and it operates five banking offices serving Rome, Lee, and New Hartford, N.Y. The Rome Savings Bank will be merged into Berkshire Bank, the principal operating subsidiary of Berkshire. After the merger is completed, Berkshire Bank, which reported $2.7 billion in assets, will serve customers in Massachusetts, New York, and Vermont through a network of 46 full-service bank branches, according to a statement.
Berkshire is expected to have total assets exceeding $3 billion and a total market capitalization for its common stock in excess of $300 million upon consummation of the transaction. Pro forma tangible equity to tangible assets is expected to improve to 8.4 percent, according to a statement.
"This is an attractive combination for both of our companies, and we expect it to produce solid investment returns to stockholders. We expect 9-cents [in] core earnings per share accretion in 2011 before transactions costs and up to 10-cents [in] earnings per share accretion in 2012 after cost saves and deal costs are fully absorbed in 2011," said Michael P. Daly, Berkshire’s president and chief executive officer. "The merger is a desirable extension of our New York franchise and is expected to accelerate our long term earnings growth."
Charles Sprock, president and CEO of Rome Bancorp, said a number of factors, including increasing compliance expenses, helped prompt the merger. Berkshire Bank’s move to Rome is its first step of expanding in the area.
"We’re looking forward to being a partner with them," he said.
"Rome is a successful and well respected company with solid asset quality and strong market share in an attractive market. It provides access to the Utica market and proximity to the Syracuse market, which was recently listed by the Brookings Institution, along with Albany, as among the strongest of the top hundred metro areas in the country," Daly said. "The Syracuse and Utica-Rome markets have a combined population of nearly 1 million. We have been successful in growing low cost deposits in markets similar to Rome and in developing strong new commercial business in adjacent markets like Syracuse and Utica. We believe that the scope of our regional bank product selection and our energetic brand initiatives will be well received in these markets. Berkshire is well positioned to be a partner to Rome and other institutions in and around our markets who recognize the benefits that can be delivered to all of our constituencies through a well-structured business combination such as this."
Dave Gonci, Berkshire’s capital markets officer, said Rome is situated just west of the bank’s thriving New York locations and represents a "natural next step."
Under the terms of the merger agreement, 70 percent of the outstanding Rome shares will be exchanged for Berkshire shares at a fixed exchange ratio of 0.5658 Berkshire shares for each share of Rome. The remaining 30 percent of Rome shares will be exchanged for cash in the amount of $11.25 per share. Based on Berkshire’s closing stock price of $18.78 on Oct. 11, the combined consideration for Rome’s shares is calculated at $10.81 per share. This represents 120 percent of Rome’s tangible book value per share, 19.3x Rome’s trailing 12 month earnings, and a 6 percent premium to core deposits based on financial information for the period ended June 30.
Stifel Nicolaus & Co. Inc. served as the financial advisor to Berkshire, and Sandler O’Neill & Partners L.P. served as the financial advisor for Rome. Luse Gorman Pomerenk & Schick P.C. served as outside legal counsel to Berkshire, while SNR Denton US LLP served as outside legal counsel to Rome.
