Berkshire Hills Bancorp, Inc. (NYSE: BHLB) and Commerce Bancshares Corp. announced today that they have signed a definitive merger agreement under which Berkshire will acquire Commerce and its subsidiary, Commerce Bank and Trust, in an all-stock transaction valued at $209 million.
Berkshire's total assets are expected to increase to $12 billion including the $2.2 billion in acquired Commerce assets. Commerce reported $1.5 billion in loans and $2.0 billion in deposits as of March 31, 2017. This in-footprint merger includes thirteen branches in the Worcester area and three branches in Boston and provides the catalyst for Berkshire to move its corporate headquarters to Boston.
"We're pleased to welcome Commerce Bank customers and employees to America's Most Exciting Bank®," said Michael P. Daly, Chief Executive Officer of Berkshire. "With the addition of the Commerce team, we will be able to leverage the strengths of both banks and capitalize on growth opportunities in the attractive, high-growth Central and Eastern Massachusetts markets. We'll also further solidify our Boston presence by moving our corporate headquarters into the heart of Boston. Our partnership with Commerce Bank provides us with the catalyst to not only be the largest regional bank headquartered in Boston, but to also be the first regional bank in two decades to have downtown headquarters. This paves the way for significant opportunities ahead to attract talent and capitalize on our previous Eastern Massachusetts growth and the strong Commerce core banking franchise."
David G. "Duddie" Massad, Commerce's Chairman of the Board, commented, "We're excited to be joining the Berkshire family. The strategic fit between the two organizations provides significant opportunities for our customers and communities. Our valued customers will benefit from the enhanced balance sheet strength and broader array of products and services offered by Berkshire, while our employees continue to provide the level of service our Worcester and Boston clients have come to expect. I'm confident that this partnership will reflect the values and talents of both organizations."
TRANSACTION SUMMARY
Following are selected terms and metrics associated with the transaction based upon current projections (all metrics are inclusive of increased regulatory burden associated with crossing $10B in assets):
- Total transaction value: $209 million
- Price to March 31, 2017 book value: 129%
- Price to March 31, 2017 tangible book value: 138%
- Tangible book value dilution of $0.15 per share or 0.7% with expected 1.0 year earn-back period using the Crossover Method and the Simple Method
- Anticipated to be 4-5% accretive to earnings per share in 2018 before transaction costs
- Core deposit premium: 3.0%
- Targeted cost saves: 20%
Upon completion of the transaction, this combination will allow Berkshire to fully absorb the earnings impacts associated with crossing $10 billion in assets, while providing modest accretion for shareholders.
TERMS OF THE AGREEMENT
Under the terms of the merger agreement, each outstanding share of Commerce common stock will be exchanged for 0.93 shares of Berkshire Hills common stock. To the extent any Commerce shareholder would own in excess of 9.9% of outstanding Berkshire common stock as of the closing of the merger, that shareholder would receive the economic equivalent in Berkshire Hills non-voting preferred shares for the amount over 9.9%.
LEADERSHIP
Two Commerce board members are expected to join Berkshire's board upon the completion of the transaction. In addition, Commerce Bank's Chief Executive Officer, Brian W. Thompson, along with Chief Operating Officer, Michael J. Crawford, will serve as advisors to Berkshire and liaisons to the local community. Key senior executives from Commerce Bank will remain with Berkshire Bank in continuing leadership roles.
APPROVALS
The transaction is intended to qualify as a tax-free reorganization for federal income tax purposes, and as a result, the shares of Commerce stock exchanged for shares of Berkshire stock are expected to be transferred on a tax-free basis. The definitive agreement has been approved by the unanimous votes of the Boards of Directors of both companies. Consummation of the agreement is subject to the approval of Commerce's shareholders, as well as state and federal regulatory agencies. The merger is targeted to be completed in six to nine months. References to corporate headquarters refer to the executive offices of Berkshire Hills Bancorp. The relocation of the bank's main office is subject to regulatory approval.
ADVISORS
Berkshire Hills was advised by J.P. Morgan Securities LLC and legal counsel was provided by Luse Gorman, PC; Commerce was advised by Sandler O'Neill & Partners, L.P., and legal counsel was provided by Nutter McClennen & Fish LLP and Fletcher Tilton PC.
ABOUT BERKSHIRE HILLS
Berkshire Hills Bancorp is the parent of Berkshire Bank – America's Most Exciting Bank®. Berkshire has approximately $9.3 billion in assets and 97 full-service branch offices in Massachusetts, New York, Connecticut, Vermont, Pennsylvania and New Jersey providing personal and business banking, insurance, and wealth management services. The Company also offers mortgages and specialized commercial lending services in targeted national markets. For more information, visit www.berkshirebank.com.
ABOUT COMMERCE BANK
Commerce Bank, headquartered in Worcester, Massachusetts, was founded in 1955 and acquired in 1993 by David "Duddie" Massad. Serving as a community bank in the Worcester and Boston areas, Commerce has approximately $2.2 billion in assets and 16 branches. Commerce offers middle-market lending, specialty finance services, and maintains relationships with multiple Payroll Service Bureau customers. For more information, visit www.bankatcommerce.com.
