Boston-based Eastern Bank will buy Cambridge Trust and sell its insurance division according to documents filed with the Securities and Exchange Commission after the close of trading Tuesday.
The deal will create a $27 billion-asset bank and reinforce Eastern’s position as the biggest Massachusetts-based commercial bank, with $19.41 billion-asset Rockland Trust Co. and $12.08 billion-asset Berkshire Bank a distant second and third. The Boston Globe first reported the deal.
The combined entity would also have $22.76 billion in deposits according to FDIC figures, making it the fourth-largest bank by deposits in the Greater Boston, after Bank of America with its $103.1 billion, Citizens with its $53.2 billion and Santander with its $23.9 billion and ahead of JPMorgan Chase with its $19.6 billion, TD Bank with its $18.3 billion and Rockland Trust with $12.7 billion.
Arthur J. Gallagher & Co., an Illinois-based insurance brokerage and risk management consultancy, will buy Eastern Bank’s 21-year-old insurance arm, Eastern Insurance, for $510 million.The deal will close in the fourth quarter of this year, subject to regulatory approval, and net Eastern around $260 million, it said in a press release announcing the twin deals.
The insurance division has been a steady earner for the bank with its commercial property and casualty insurance, personal insurance products and employee benefits consulting services.
“For more than 20 years, the dedicated team at Eastern Insurance has grown the agency into what is now the third largest bank-affiliated insurance brokerage in the country and a top 50 agency overall,” Eastern’s CEO Bob Rivers said in a statement. “The growth and success of Eastern Insurance was made possible by the leadership of CEO Tim Lodge and the dedicated team who have built the agency into one of the premier insurance brokerage firms in the country. For that and more, I am grateful to each and every one of my colleagues at Eastern Insurance. On behalf of all of their colleagues at Eastern, they will be greatly missed.”
The $21.56 billion-asset Eastern then plans to turn around and buy $5.49 billion-asset Cambridge Trust in an all-stock deal valued at $528 million. The deal represents 114 percent of Cambridge Trust’s tangible book value, Eastern Bank said.
“I’ve long admired the success of Cambridge Trust under Denis’s leadership, and I’m excited to welcome Denis and the Cambridge team to Eastern,” Rivers said. “As we set our sights on the future, the enhanced capabilities and financial strength created by this merger will allow us to further position Eastern as the region’s local financial partner of choice, delivering enhanced value for our customers and shareholders, greater support for our communities, and increased opportunities for our colleagues.”
If regulators and both banks’ shareholders approve the deal, expected to close in the first quarter of next year, 59-year-old Rivers will become Eastern’s executive chairman and 58-year-old Cambridge Trust CEO Denis Sheahan will become Eastern’s CEO, while 48-year-old Eastern board vice chair and President Quincy Miller, long seen as Rivers’ natural successor, will add “chief operating officer” to his titles. Sheahan and Miller will both report directly to Rivers.
Three members of Cambridge Trust’s board will also join Eastern’s board along with Sheahan.
“I am delighted to be a part of bringing together two terrific companies who share common values and vision. I know the Cambridge Trust team will rise to the opportunity ahead and I look forward to working with our colleagues at Eastern as we integrate and deliver exceptional service to our clients,” Sheahan said in a statement provided by Cambridge Trust.
Eastern said the merger and the insurance sale are expected to add around 20 percent to its 2024 per-share earnings. The bank said it expects the deal to start breaking even in nine quarters and have a rough internal rate of return of 20 percent.
While the banks’ footprints in Greater Boston and Southern New Hampshire largely overlap – an investor presentation included in the corporate filings noted about half of both banks’ branches are located within a mile of each other – Cambridge Trust has built a substantial business catering to Massachusetts’ affluent. In addition to bulking up Eastern’s deposits and assets, acquiring Cambridge Trust will give its own wealth management arm a significant boost, with Eastern estimating in its securities filings that the combined entity would have $7.6 billion in assets under management, making it the largest bank-owned investment advisor in the state.