First Niagara Financial Group Inc., the Buffalo, New York-based banking company, agreed to acquire Connecticut’s NewAlliance Bancshares Inc. in the biggest merger of U.S. lenders since October 2008.
First Niagara will buy New Haven-based NewAlliance for about $1.5 billion in cash and stock, the companies said in a statement today. First Niagara said it will have $29 billion in assets, more than 10 times what it had in 2000, ranking it among the 25 biggest U.S. lenders.
The deal marks the largest takeover of an open U.S. bank since PNC Financial Services Group Inc. agreed to buy Cleveland- based National City Corp. in October 2008, according to data compiled by Bloomberg. First Niagara, founded in 1870, is pushing into New England after completing at least nine acquisitions of banks or branches in the past decade.
“This may well be the beginnings of that new normal, at least as it relates to the world of M&A,” First Niagara Chief Executive Officer John Koelmel told analysts on a conference call, referring to mergers and acquisitions. “We’re comfortable, if not proud, to be helping set that pace and set the tone.”
NewAlliance holders will get 1.1 shares of First Niagara. That’s equal to $14.09 apiece, or a 24 percent more than yesterday’s closing price. NewAlliance jumped $1.42, or 13 percent, to $12.78 at 4:03 p.m. in New York Stock Exchange composite trading. First Niagara fell 6.5 percent to $11.95 for the biggest decline in the 24-company KBW Bank Index.
The transaction is expected to close in the second quarter of 2011 and start adding to earnings per share that year, not including transaction costs, according to the statement. The deal will boost profit 4 percent to 5 percent in 2012, it said.
NewAlliance would add 88 branches including locations in Connecticut and Massachusetts to First Niagara’s network of more than 250 outlets in New York and Pennsylvania, according to its website.
The banks are still deciding how they may combine management including NewAlliance CEO Peyton Patterson, Koelmel said on the call. NewAlliance has been profitable every year since 2003, according to Bloomberg data.
First Niagara has added branches in Pennsylvania through at least two acquisitions completed within the past year, according to Bloomberg data. The bank took over Harleysville National Corp. in April, and purchased 57 National City branches from Pittsburgh-based PNC in September.
JPMorgan Chase & Co. and law firm Hinckley, Allen & Snyder LLP advised NewAlliance on the deal, according to the statement. Sandler O’Neill & Partners LP and law firm Sullivan & Cromwell LLP advised First Niagara.