People’s buys United Bank
People’s United nabs United Bank for $759M
People’s United Financial Inc. pushed deeper into Hartford County, snapping up the Hartford-based parent of
United Bank, but the deal will stoke worries about layoffs, particularly at United’s downtown Hartford headquarters. The Bridgeport-based parent of People’s United said the deal, will solidify People’s United presence in central Connecticut and strengthen its market share in western Massachusetts.
HARTFORD – People’s United Financial Inc. pushed deeper into Hartford County on Monday, snapping up the Hartford-based parent of United Bank — a sign, People’s United said, of its confidence in Connecticut but the deal will stoke worries about layoffs, particularly at United’s downtown Hartford headquarters.
The Bridgeport-based parent of People’s United Bank said the deal, valued at $759 million, will solidify People’s United presence in the central Connecticut market and strengthen its market share in western Massachusetts.
While the purchase was attractive for its customer base, People’s United also saw overlapping markets as an opportunity for cost-cutting, about 55 percent — or $88 million — of what it cost to run United Bank’s parent, United Financial Bancorp Inc.
The cost reductions are likely to take a heavy toll on United Bank’s downtown Hartford corporate headquarters.
With much fanfare, United relocated its headquarters — and 200 employees — to downtown from Glastonbury in late 2017. The bank leased 68,000 square feet at the Goodwin Square tower, an expansion of about 22,000 square feet over its former space. The lease played a key role in anchoring the Hartford office tower’s recent revival under new owners.
With its move to downtown Hartford, United Bank became active in financing downtown redevelopment projects.
At the end of last year, United Bank had about 700 employees.
In a conference call after Monday’s acquisition announcement, People’s United Chief Financial Officer David Rosato said, “A significant amount [of cost savings] will be executive or employee cost reduction driven by the branch overlap, but there also significant savings in [administrative] functions, real estate regulatory costs and marketing and advertising as well.”
The branch overlap between the two banks is significant: 61 percent of United Bank branches are within two miles of People’s United branch, while 88 per
cent are within five miles.
“Together with United’s management we will evaluate the combined branch networks to understand how to best serve our combined customer base and optimize the network accordingly,” Jack Barnes, the chief executive of People’s United, told analysts on the call.
Neither Barnes nor Rosato pegged how many employees might lose their jobs.
The attractiveness in a so-called “in-market” merger where there is overlap comes in acquiring customers that can be sold other products in services without having to maintain all the overhead — branches and employees — of the acquired bank.
The acquisition of United Bank is the second in a year for People’s United in the Hartford area. Last fall, People’s United completed its purchase of Farmington Bank, in a smaller, $544 million deal.
People’s United’s purchase of United Bank is expected to close in the fourth quarter, pending shareholder and regulatory approvals.
United Bank’s roots in Connecticut are deep, stretching back to 1858 under a predecessor bank, Rockville Savings Bank. Rockville went public in 2005 and merged with the smaller United Bank but taking the United name.
The United Bank lighted logo just appeared atop Goodwin Square in recent months.
With $7.5 billion in assets, United Bank’s size presented challenges for how much it could afford to invest in developing new technologies to keep up with what larger and non-traditional competitors are offering their customers. The cost of meeting regulatory requirements also rose after the last financial crisis. The slow growth economy of United Bank’s market also is likely to have played a role.
In December, United cut its staff of home loan officers to emphasize digital delivery of mortgages.
People’s United has 413 branches, including its supermarket branches, in Connecticut and five other states: NewYork, Massachusetts, Vermont, New Hampshire and Maine. United Bank has 59 branches in Connecticut, Massachusetts and Rhode Island.
Together, the combined banks will have more than $55 billion in assets.
“We are confident their broad array of products and services, in-market knowledge and the size and strength of their balance sheet will deliver enhanced value to our stakeholders,” William H. W. Crawford, United Bank’s president and chief executive, said, in a statement.
Barnes told analysts Monday that People’s has been strengthening its share of the metro New York and greater Boston markets.
“This transaction affirms People’s United commitment to Connecticut, a market where we continue to do very well and we remain confident about the underlying economic strength of the state,” Barnes said.
Barnes said the bank’s optimism comes from the state’s diverse mix of companies in expanding fields such as bioscience, clean energy, digital media, information technology and advance manufacturing. The state, he said, is supported by a talented and well-educated workforce.
“What is most exciting is the culture of innovation and entrepreneurship that is thriving within the state,” Barnes said. “Connecticut has quietly become home to a significant number of tech startups.”
“In Hartford, start-ups are propelling the insurance industry forward to such an extent that last year the National League of Cities recognized the city as the country’s premiere destination for insurance technology, Barnes said.
Barnes also stressed that People’s United would remain active and engaged in the local communities where it does business.
Under the terms of the agreement, approved by the boards of directors of both banks, United Financial Bancorp shareholders will receive 0.875 shares of People’s United Financial stock for each United Financial Bancorp share. The transaction is valued at $14.74 for each United Financial Bancorp share, based on the closing price of People’s United common stock on July 12.
The acquisition announcement came after the close of trading Monday. Shares in People’s United closed at $16.41, off 20 cents in after-hours trading. United Financial Bancorp shares closed at $14.02, down 9 cents.
Kenneth R. Gosselin can be reached at kgosselin@courant.com.