Private equity firm Warburg Pincus has announced plans to invest up to $115 million in Connecticut’s Webster Financial Corp., parent company of Webster Bank, in a deal that could potentially open a door to the bank’s eventual sale.
In a statement, Webster said Warburg will invest the money in two unequal parts. The first tranche will come with a $40.2 million sale of approximately 4 million shares of common stock and 3 million warrants. Following necessary antitrust and federal bank regulatory approvals, Warburg will fund the remaining $74.8 million and be issued the remaining common stock, junior non-voting preferred stock and warrants. The total deal involves 11.2 million shares.
For the deal to proceed in its entirety, Webster will have to modify its corporate charter. The company said it plans to call a special meeting of its shareholders asking to eliminate a provision in its corporate charter prohibiting any third party from owning more than 9.9 percent of Webster’s common stock without shareholder approval, and to approve Warburg’s investment.
If approved in full by shareholders and regulators, Warburg’s investment would represent 15.2 percent of common stock outstanding, and removing the ownership provision could potentially clear the way for the bank’s eventual sale in the future.
Pro Forma for its investment, Warburg Pincus will own 5.9 percent of Webster’s common stock outstanding prior to the bank regulatory and shareholder approvals.
As part of the agreement, David A. Coulter, a Warburg Pincus managing director who co-leads the firm’s financial services investment activities, will join Webster’s board. Coulter is the former chairman and CEO of BankAmerica Corp. and vice chairman of JP Morgan Chase.
"Warburg Pincus’ investment further strengthens Webster’s capital base which already significantly exceeded regulatory requirements for well-capitalized banks. The additional capital will enable us to capitalize on the extraordinary banking opportunities in the market as we pursue our vision to be New England’s bank," said Webster Chairman and Chief Executive Officer James C. Smith. "This investment represents another important step in our capital planning, and coupled with our recently completed and highly successful exchange offer, increases Webster’s tangible common equity by more than $285 million on a pro forma basis with minimal tangible book value dilution. Webster’s ability to attract a long-term value investor of Warburg Pincus’ caliber and experience in the banking sector underscores the inherent strength of our core business and long-term strategy. We also are delighted to welcome Dave Coulter, a well-known senior banking executive whom we respect, to our board."
