People's United Financial to acquire Chittenden Corp for $1.9B
People's United Financial, Inc (Nasdaq: PBCT), of Bridgeport, CT, the holding
company for People's United Bank, announced June 27, 2007, a definitive
agreement to acquire Chittenden Corporation (NYSE: CHZ), based in Burlington, in
a stock and cash transaction valued at $1.9 billion. Consummation of the
agreement is subject to the approval of the shareholders of Chittenden, as well as
various regulatory agencies. The acquisition is expected to close in the first
quarter of 2008.
Paul Perrault, chairman, president and chief executive officer of Chittenden
Corporation said in a prepared statement that Chittenden will receive two seats on
the People's board. Chittenden Bank nameplate will continue, as will the local
nameplates and boards of directors of the several other banks around New
England owned by Chittenden Corp.
Perrault, and his opposite number at People's, John Klein, said during a subsequent press conference in Burlington that while there
may be some "redundancies," as Klein put it via speaker phone, in employment, there would not be a
"slash and burn" of jobs, as Perrault put it, to cut costs through layoffs. People's,
with 2,600 employees, is not that much larger than Chittenden, with 2,200, they
said, so the staff at Chittenden, with the exception of some unnamed number of
back office employees, would be retained. Chittenden employees around 1,000
just in Vermont.
The reason for the sale was in the bringing together of two strong companies to
make a much stronger company in order to compete, the CEOs said. The boards of
directors finalized the deal June 26. Discussions for an acquisition began about a
year ago, Perrault said, and heated up within the last couple of months.
"The sale of Chittenden Bank has been imminent for 20 years," Perrault said. He's
been CEO for 17 years and the idea of a merger or acquisition, in one direction or
another, has been part of the job that entire time. He and Klein said that the
"cultural" fit between these two companies was the strength of this deal.
Perrault said the Chittenden, for its part, could have remained independent for
some time to come.
"We are a very, very strong bank," he said.
The $1.9 billion purchase price is approximately 55 percent in cash and 45 percent
in People's United Financial stock.
The $1 billion cash consideration will be funded through People's internal
resources. The receipt of People's United stock by shareholders of Chittenden will
be tax-free.
As of June 26, the premium for Chittenden shareholders was 31 percent. As typical
for such a deal, the stock price on June 27 went down some for People's United
and up some for Chittenden.
People's United Bank ($14 billion assets) currently operates 160 branches with
1,600 employees. Chittenden ($6.6 billion assets) currently has 122 branches and
152 ATMs in New England through six bank subsidiaries. The combined company
will have assets of approximately $22 billion.
Chittenden, meanwhile, had been on its own buying spree of smaller banks. On
January 19, 2007, Chittenden announced that it would buy Merrill Merchants
Bancshares, Inc (assets of $458 million) of Bangor, ME, for $111.4 million. On
June 4, it announced that it would acquire Community Bank & Trust Company
($426 million in assets) in Wolfeboro, NH, for approximately $124.1 million.
Chittenden (chittendencorp.com) is a bank holding company headquartered in
Burlington that was founded in 1904 as Chittenden Trust Company. Through its
subsidiary banks, Chittenden's financial products include deposit accounts and
services; commercial and consumer loans; insurance; and investment and trust
services to businesses, individuals, and the public sector.
People's United Financial, Inc is the holding company of People's United Bank
(peoples.com), one of Connecticut's largest banks. People's United Financial has
assets of $14 billion, more than 240 ATMs and 160 branches. Founded in 1842,
People's United Bank provides consumer, commercial, insurance, retail investment
and wealth management and trust services to personal and business banking
customers.
Under the terms of the definitive agreement, which has been unanimously
approved by both companies' board of directors, at closing Chittenden Corporation
shareholders will have the right, subject to proration, to elect to receive cash or
People's United common stock, in either case having a value equal to $20.35 plus
the product of .8775 times the average closing price of People's United shares for
the five day period prior to the closing. Based on the average closing price of
People's United for the three day period ending June 25, 2007, the transaction is
valued at $37.00 per Chittenden Corporation share.
Morgan Stanley acted as financial advisor to People's United and Cleary Gottlieb
Steen & Hamilton LLP and Thacher Proffitt & Wood LLP acted as legal counsel.
Lehman Brothers Inc. and JP Morgan Securities Inc. acted as financial advisor to
Chittenden Corporation and Goodwin Procter LLP served as legal counsel.