Hyannis-based Cape Cod Bank & Trust Co. is being acquired by Portland, Maine-based Banknorth Group, the fourth-largest bank in New England.
In continuing with the Massachusetts merger trend, Banknorth Group, New England’s fourth-largest bank, recently captured the No. 2 position on Cape Cod by acquiring the $1.4 billion-asset Cape Cod Bank & Trust Co.
Last Tuesday, Portland, Maine-based Banknorth announced it had reached a definitive agreement to acquire CCBT Financial Cos., the parent company of Hyannis-based Cape Cod Bank & Trust, in an all-stock transaction valued at approximately $300 million.
Cape Cod Bank & Trust, with $1.4 billion in assets and $1 billion in deposits, has 26 branches in Barnstable and Plymouth counties. It has the second-highest market share in Barnstable County, which encompasses Cape Cod, and is overshadowed in that region only by Cape Cod Five Cents Savings Bank. FleetBoston and Citizens Bank also have market share in the Cape Cod area.
Banknorth Group’s banking subsidiary, Banknorth N.A., currently operates 114 branches in Massachusetts and recently announced the acquisitions of Foxborough Savings Bank and First & Ocean Bancorp. Pro forma, the three acquisitions will increase Banknorth’s total branches in Massachusetts by 35 to 149.
“This is very exciting for us and takes us into a brand-new market … and starts opening our market south of Boston,” said Brian Arsenault, senior vice president of investor relations at Banknorth. “Whenever you have the No. 1 or No. 2 market share [in the area], you have the opportunity to have the control on pricing and setting standards and our goal is to continue to be one of the top three in the market.”
‘Conflicting’ Feelings
Arsenault said the acquisition of Cape Cod Bank & Trust adds to Banknorth’s proposed plan of building up branches and customer awareness in Massachusetts, adding that the move is just the beginning of its plans.
“This [merger] builds us up to our bulk in Massachusetts, which is one of our key goals,” said Arsenault. “You’ll continue to see us grow organically in Massachusetts and look for more acquisition opportunities.”
The merger is anticipated to close in second quarter of 2004.
But despite the big bank entering the otherwise local and confined area of Cape Cod, community banks on the Cape are not worried.
Elliott Carr, president and chief executive officer of Cape Cod Five Cents Savings, said the acquisition of Cape Cod Bank & Trust and the introduction of Banknorth to the Cape Cod marketplace is bittersweet.
“The merger evokes a conflicting sense of feelings,” said Carr. “Cape Cod Bank & Trust has been a wonderful competitor and colleague, even though [we] … were the two most competitive for people who liked local banking. At the same token, we will benefit more from this [acquisition] because anyone who prefers local banking will come to us over time. The Cape is a place where people, a little bit more than elsewhere, retire and look back to the good old days … Cape Cod Five has a long history and nostalgia.”
Carr said that while other smaller banks with branch presence on the Cape have been acquired, Cape Cod Bank & Trust is the most “abrupt merger, which holds the most impact” in the Cape Cod banking community. But he maintained, “We have the largest market share and we’re holding on to our presence.”
Banknorth officials, however, are poised and ready to pounce into the Barnstable County region.
“In one transaction, we have become a significant banking and financial services presence in this important Massachusetts market,” said William J. Ryan, Banknorth chairman, president and chief executive officer. “We look forward to bringing a broader array of products and services to the customers of Cape Cod Bank & Trust while maintaining that venerable institution’s commitment to the communities it serves.”
In a prepared statement, CCBT Financial Cos. President and Chief Executive Officer Stephen B. Lawson said, “We recognize the importance of aligning ourselves with a true New England company. Like us, Banknorth has been an innovator in bringing its customers insurance and investment services to complement a full range of banking services. Through this strategic alliance, we enhance the commercial and consumer lending expertise available to current and prospective customers.”
Lawson issued only this statement and directed all media calls to Banknorth officials.
The terms of the agreement call for outstanding shares of CCBT Financial to be converted into 1.084 shares of Banknorth common stock, plus cash in lieu of any fractional share interest. That results in CCBT being valued at $35 per share based on Banknorth’s closing common stock price of $32.30 on Dec. 5 of this year.
“This is a good financial transaction for Banknorth that is consistent with our history of acquisitions that add to earnings per share,” said Peter J. Verrill, Banknorth’s chief operating officer. “The $35 price represents 259 percent of CCBT’s book value and a deposit premium of 18.5 percent. We believe that this is a reasonable price given CCBT’s outstanding market share and branch franchise.”
Banknorth anticipates cost savings of 25 percent and will implement a restructuring of a portion of CCBT’s securities portfolio to increase net-interest income.
The directors of both Banknorth and CCBT have approved the definitive agreement. The transaction is subject to all required regulatory approvals, the shareholders of CCBT Financial and other customary conditions. The transaction is expected to be finalized by midyear 2004 with operational integration to follow soon after.
Melanie Nayer may be reached at mnayer@thewarrengroup.com.
