Berkshire Hills Bancorp has raised its bid to buy Worcester’s CNB Financial Corp., parent of Commonwealth National Bank. Berkshire, reacting to a competing bid from Springfield’s United Financial Bancorp, presented CNB with an offer equivalent to $9.23 per share, but Commonwealth officials say they believe the price will increase by the time the deal closes. The boards of both institutions have agreed to the revised deal, according to a statement.
United Financial bid $10 per share. CNB said that while Berkshire’s bid is currently less than United’s, it sees more potential in a combination with Berkshire.
Pittsfield-based Berkshire Hills, parent company of Berkshire Hills Bank, had previously announced a plan to buy Commonwealth for $8.50 per share, or $19.5 million, May 11. Two days later, United Financial jumped into the fray with a cash and stock offer worth $22.8 million, or $10 per share, an offer it deemed "superior" to Berkshire’s.
"After thorough consideration and consultation with its legal and financial advisors, CNB’s board of directors has determined that the United proposal does not constitute a superior proposal, under the terms of the merger agreement executed between the parties on April 29, 2009, as compared to the revised terms of the transaction with Berkshire," Berkshire officials said in a statement.
United’s offer was fixed at $10 per share, while Berkshire’s bid fluctuates with changes in the market price for Berkshire common stock, offering at least the potential for a greater windfall.
"The CNB board reviewed the recent and historical trading history for Berkshire common stock and compared its current trading multiples to Berkshire’s peers and concluded that there is strong potential for price appreciation," the statement said. "The CNB board also considered information concerning the business, earnings, operations, and prospects of United and Berkshire, both individually and as combined with CNB Financial, and concluded that Berkshire common stock offered greater long-term potential."
The CNB board also determined that the Berkshire agreement had a greater likelihood of completion, and a successful integration of the two banks was more likely given Berkshire’s experience in previous transactions, including the integration of two banks, six insurance agencies, one asset manager and one broker-dealer.
United has never acquired another bank since it became publicly-traded in 2007.
Another sticking point for CNB with the United deal was its inclusion of a due diligence contingency, which led to fears that the deal may not be concluded at the announced price.
"Berkshire is committed to serving the Worcester market through this partnership which has superior prospects and value to the stockholders of both institutions," Berkshire President Michael P. Daly said in a statement. "We have had more opportunity to get to know the CNB team and are impressed with their skill and dedication in serving their markets. Berkshire has strong commercial and retail banking teams which are moving forward with integration planning with CNB, and all constituencies will benefit from our experience with multiple acquisitions of banks, insurance agencies, and wealth management providers."
Consummation of the agreement is subject to the approval of CNB’s stockholders, as well as state and federal regulatory agencies. Calls to CNB and United Financial were not returned.
Berkshire also announced this afternoon its intention to repay $40 million in preferred stock to the U.S. Treasury, granted to the bank under the TARP program, by the end of this month from existing liquid assets held by Berkshire. The Treasury has approved Berkshire’s repayment plan, the bank said.
Berkshire said it expects that its ratio of tangible equity to tangible assets will be approximately 8.75 percent immediately after repayment of the TARP preferred stock and including the net proceeds from its common stock offering to date. The company also expects to enter into negotiations with the government for the repurchase of the associated warrant for common shares.
On May 15, Berkshire raised $30.1 million through its previously announced public stock offering. The company issued 1.4 million shares of common stock and recorded net offering proceeds of approximately $28.0 million. Additionally, the underwriters have an over-allotment option to purchase an additional 210,000 shares for thirty days from the date of the underwriting agreement.
