EAST SYRACUSE — Massachusetts–based Berkshire Hills Bancorp, Inc. (NASDAQ: BHLB), parent of Berkshire Bank, announced Thursday evening that it will acquire Beacon Federal Bancorp, Inc. (NASDAQ: BFED) in a $132 million deal.
Under the terms of the agreement, 50 percent of outstanding Beacon shares will be swapped for Berkshire shares at a fixed ratio of 0.92 shares for each Beacon share. The remaining 50 percent of the Beacon shares will exchange for $20.50 per share in cash. The transaction is valued at $20.35 per Beacon share based on the $21.96 Berkshire closing price on Wednesday May 30.
Beacon shares were trading at $19.15 as of 1:30 p.m. today, up $5.85, or 44 percent, on the day.
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Each Beacon shareholder will have the right to elect the form of consideration, subject to proration procedures to maintain the 50-50 mix of stock and cash. The transaction is intended to qualify as a reorganization for federal-income tax purposes and the shares of Beacon stock exchanged from Berkshire should transfer on a tax-free basis, the banking companies said in a joint news release.
The boards of both businesses have approved the acquisition, which is now subject to the approval of Beacon’s shareholders as well as state and federal regulatory agencies.
Berkshire expects to complete the merger in the fourth quarter and appoint one Beacon board member to the Berkshire board.
Beacon Federal Bancorp, headquartered in the village of East Syracuse, operates seven full-service Beacon Federal branches, including one each in East Syracuse, DeWitt, Rome, and Marcy. It has deposits totaling $677 million. Most of Beacon’s business is concentrated in the Syracuse metropolitan area as well as the Utica–Rome market, which Berkshire also entered last year when it acquired Rome Bancorp. Beacon Federal will be merged into Berkshire Bank.
Upon completion of the Beacon merger, Berkshire Bank will have 10 branch offices serving the Syracuse and Utica–Rome markets with $700 million in deposits and the third position in the market share among regional banks.
Berkshire will also add Beacon’s Chelmsford, Mass. office to its roster, making it Berkshire’s first eastern Massachusetts full-service branch. Berkshire currently operates 10 residential and commercial-lending offices in central and eastern Massachusetts. Berkshire plans to divest Beacon’s modest-sized Tennessee operations — it has two branches there.
“We are very pleased to extend our presence in Central New York in this partnership with Beacon,” Berkshire President and CEO Michael P. Daly said in the news release, announcing the deal. “Our New York expansion last year exceeded our expectations in terms of financial return, customer retention, and business-development opportunities. I am confident that our Beacon partnership will also prove to be a solid success for all our constituencies.”
The Beacon deal should add 22 cents per share to Berkshire’s core earnings in 2013, he said. “Our goal is that the higher earnings and return on equity will enhance the value of our stock for both existing shareholders and for new shareholders from Beacon joining us in this transaction,” he said.
Beacon President and CEO Ross Prossner said his customers will benefit from Berkshire’s resources in banking, wealth management, and insurance. “Our combined operations will position us well to further increase market share in the Central New York market,” he added.
New York City–based Sandler O’Neill & Partners, L.P. served as the financial advisor to Berkshire, while Keefe, Bruyette & Woods, Inc., also based in New York City, was the financial advisor for Beacon. Washington, DC–based Luse Gorman Pomerenk & Schick, P.C. served as outside legal counsel to Berkshire, while Atlanta–based Kilpatrick Townsend & Stockton LLP was outside legal counsel to Beacon.
Headquartered in Pittsfield, Mass., Berkshire Hills Bancorp has $4.3 billion in assets and 68 branches in Massachusetts, New York, Connecticut, and Vermont.
Beacon Federal earned $5.7 million, or 93 cents a share, in 2011, up almost 7 percent from 2010. In the first quarter of 2012, Beacon Federal reported profit of $1.3 million, down more than 13 percent.
For more on this story, check out the June 8 issue of The Central New York Business Journal.
Contact DeLore at tgregory@cnybj.com
