BHLB to Buy Brookline Bancorp for $1.14B, Expand Footprint

Berkshire Hills Bancorp, Inc. BHLB has agreed to acquire Brookline Bancorp, Inc. BRKL and its subsidiary, Brookline Bank. The all-stock transaction has been valued at roughly $1.14 billion.The deal is expected to be closed by Sept. 30, 2025, subject to requisite regulatory approvals and shareholders’ approvals of both entities. The merger agreement has been approved by the board of directors of both entities.Upon closure, Brookline will be merged into Berkshire and Brookline Bank will be merged into Berkshire Bank, a subsidiary of Berkshire. Before closing, the combined company will announce a new name and ticker symbol to be traded on the New York Stock Exchange. Further, the combined subsidiaries will function under a new name which will also be announced prior to the closure of the transaction.David Brunelle, chairperson of Berkshire, stated, “This highly compelling combination is a true merger of equals that will create a preeminent northeast financial institution. Scale and efficiency combined with our shared culture of true community banking is a powerful driver of value for all of our stakeholders.”Details of the Berkshire-Brookline TransactionPer the agreement, Berkshire will pay 0.42 shares of its common stock for each share of Brookline. In conjunction with the deal, Berkshire will issue $100 million of its common stock at $29 per share. The capital raise is anticipated to be completed on Dec. 19, 2024. The proceeds will likely be used to support the pro forma bank’s balance sheet and regulatory capital ratios.Boston, MA-based Brookline Bancorp operates 65 branches across Massachusetts, Rhode Island, and New York. As of Sept. 30, 2024, BRKL had roughly $11.7 billion in assets, $9.8 billion in total loans and $8.7 billion in deposits.The combined entity is anticipated to have roughly $24 billion in total assets, $19 billion in total loans and $18.3 billion in total deposits. Also, the combined bank will be segregated into six regions, led by three regional presidents from Berkshire and Brookline each. Further, Berkshire’s existing four bank charters will be consolidated into a single bank, a Massachusetts state-chartered bank, upon closing. Brookline Bank will represent the consolidated bank charter. Upon the completion of the deal, the board will comprise eight directors each from Berkshire and Brookline. Further, Berkshire expects to increase its dividend post-closure to $1.29 per share annually.Rationale Behind the BHLB-BRKL DealThis transaction is likely to improve BHLB’s deposit mix through high-quality core deposits and complementary footprint expansion, with the company having a top 10 deposit market share in 14 out of 19 Metropolitan Statistical Areas. Also, it will likely unlock meaningful growth opportunities via business diversification and enhanced competitive positioning alongside offering better dynamics to manage income-producing commercial real estate loan concentration.Berkshire will likely benefit from expected cost-savings of 12.6% of combined non-interest expense, 75% of which will be phased in 2025 and the rest will be realized thereafter. The company is expected to incur one-time pre-tax merger expenses of $93 million.The deal is anticipated to be roughly 14% and 40% accretive to BHLB’s 2025 and 2026 earnings per share, respectively, assuming the execution of cost savings. Further, the company expects a common equity tier 1 capital of 10.5% by 2026 year-end and a 25% internal rate of return.Also, tangible book value is expected to dilute by 16.7%, with an estimated earn-back period of approximately 2.9 years. Further, Berkshire anticipates roughly 16.5% return on average tangible common equity, 48% efficiency ratio, and 1.28% return on average assets by 2026-end, adjusting for the phased-in cost savings.The transaction creates a premier Northeast commercial banking franchise with 148 branches and operations in distinct, lucrative markets. With minimal branch overlap, the franchise will benefit from economies of scale. Further, the regional banking model enables regional presidents to act autonomously with the support and balance sheet of the larger institution.Our Take on BHLB’s Inorganic Expansion EffortThe move aligns with Berkshire’s long-term inorganic growth strategy, indicating its emphasis on strategic buyouts to expand its presence and capitalize on revenue and cost benefits.Year to date, shares of Berkshire and Brookline have risen 20.3% and 14.5%, respectively. The industry has risen 20.1% in the same time frame.Image Source: Zacks Investment ResearchCurrently, BHLB carries a Zacks Rank #2 (Buy), while BRKL sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Similar Steps by Other Finance FirmsEarlier this month, SEI Investments Co. SEIC acquired a Boston-based, tax-smart technology provider — LifeYield. This acquisition will enable SEIC to provide cost-effective, automated, real-time unified managed household capabilities in a fully bundled overlay solution. This approach will allow advisors to look across all account registrations and optimize clients' after-tax returns.While the acquisition is not deemed significant in terms of asset size or material impacts on the company operations or financial performance, it builds upon a collaboration established in 2022 between SEIC and LifeYield.Similarly, Independent Bank Corp. INDB agreed to acquire Enterprise Bancorp, Inc. The deal is valued at roughly $562 million and will be paid through roughly 7.5 million shares and $27.1 million in cash.This acquisition will deepen INDB’s footprint in demographically lucrative markets, including northern Massachusetts and southern New Hampshire. It will also meaningfully expand wealth assets under administration in adjacent markets.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Berkshire Hills Bancorp, Inc. (BHLB): Free Stock Analysis Report SEI Investments Company (SEIC): Free Stock Analysis Report Independent Bank Corp. (INDB): Free Stock Analysis Report Brookline Bancorp, Inc. (BRKL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks