Tower Bancorp (TOBC) to Acquire First Chester County Corp. (FCEC) for $10.22/Share
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Tower Bancorp, Inc. (NASDAQ: TOBC) and First Chester County Corporation (NASDAQ: FCEC) today jointly announced the signing of a definitive merger agreement pursuant to which Tower will acquire First Chester in an all-stock transaction valued at approximately $65 million or $10.22 per share.
The transaction, approved by the boards of directors of both companies, further broadens the geographic markets of Tower Bancorp into demographically attractive and contiguous markets predominantly located in the Pennsylvania counties of Chester and Delaware. This transaction will provide Tower with the addition of $1.3 billion in assets including, $958 million in gross loans held for investment, $986 million in deposits as well as 23 branches situated across four counties in southeastern Pennsylvania.
“This acquisition is a continuation of our strategy to expand selectively our geographic footprint in contiguous markets with long-term growth potential,” said Tower Chairman and Chief Executive Officer Andrew S. Samuel. “Upon closing we will be one of central and southeastern Pennsylvania’s largest independent community banks. Moreover, First Chester customers and the local community will benefit from the continued presence and engagement of a locally managed bank.”
Under the terms of the agreement, each First Chester shareholder will receive 0.453 shares of Tower common stock for each First Chester share. The market value as of December 24, 2009 of $10.22 per First Chester share represents 90% of the company’s tangible book value. As described in the definitive merger agreement, the exchange ratio is subject to upward or downward adjustment if loan delinquencies at First Chester increase or decrease beyond specified amounts.
“We believe this transaction will create significant value for First Chester shareholders, both immediately and longer term,” said John A. Featherman III, current Chairman, President and Chief Executive Officer of First Chester. “In addition, both institutions share a similar culture and have a strong commitment to their respective communities.”
Management anticipates that there will be no branch closures. Tower expects to achieve 15% cost savings, or approximately $12 million, through the reduction of administrative and operational redundancies. Additionally, Tower expects that this acquisition will immediately be significantly accretive to earnings per share.
As part of the definitive agreement, Tower’s subsidiary bank, Graystone Tower Bank, has agreed to increase its lending facility with First Chester to up to $26 million as well as to purchase up to $100 million of residential mortgage and commercial loans from First National Bank of Chester County in order for the bank to satisfy the regulatory capital requirements of the Office of the Comptroller of the Currency (the “OCC”).
Upon closing of the First Chester acquisition, on a pro forma basis, Tower will continue to maintain regulatory capital ratios in excess of the “well-capitalized” level. Neither Tower nor First Chester elected to receive funds under the US Treasury’s Capital Purchase Program. In order to maintain Tower’s well-capitalized position, the merger agreement provides specific protections in the event of an increase in First Chester’s loan delinquencies prior to closing.
It is anticipated that the transaction will be completed during the second quarter of 2010, pending regulatory approvals, the approval of the shareholders of both Tower and First Chester, and the satisfaction of other closing conditions.
The transaction, approved by the boards of directors of both companies, further broadens the geographic markets of Tower Bancorp into demographically attractive and contiguous markets predominantly located in the Pennsylvania counties of Chester and Delaware. This transaction will provide Tower with the addition of $1.3 billion in assets including, $958 million in gross loans held for investment, $986 million in deposits as well as 23 branches situated across four counties in southeastern Pennsylvania.
“This acquisition is a continuation of our strategy to expand selectively our geographic footprint in contiguous markets with long-term growth potential,” said Tower Chairman and Chief Executive Officer Andrew S. Samuel. “Upon closing we will be one of central and southeastern Pennsylvania’s largest independent community banks. Moreover, First Chester customers and the local community will benefit from the continued presence and engagement of a locally managed bank.”
Under the terms of the agreement, each First Chester shareholder will receive 0.453 shares of Tower common stock for each First Chester share. The market value as of December 24, 2009 of $10.22 per First Chester share represents 90% of the company’s tangible book value. As described in the definitive merger agreement, the exchange ratio is subject to upward or downward adjustment if loan delinquencies at First Chester increase or decrease beyond specified amounts.
“We believe this transaction will create significant value for First Chester shareholders, both immediately and longer term,” said John A. Featherman III, current Chairman, President and Chief Executive Officer of First Chester. “In addition, both institutions share a similar culture and have a strong commitment to their respective communities.”
Management anticipates that there will be no branch closures. Tower expects to achieve 15% cost savings, or approximately $12 million, through the reduction of administrative and operational redundancies. Additionally, Tower expects that this acquisition will immediately be significantly accretive to earnings per share.
As part of the definitive agreement, Tower’s subsidiary bank, Graystone Tower Bank, has agreed to increase its lending facility with First Chester to up to $26 million as well as to purchase up to $100 million of residential mortgage and commercial loans from First National Bank of Chester County in order for the bank to satisfy the regulatory capital requirements of the Office of the Comptroller of the Currency (the “OCC”).
Upon closing of the First Chester acquisition, on a pro forma basis, Tower will continue to maintain regulatory capital ratios in excess of the “well-capitalized” level. Neither Tower nor First Chester elected to receive funds under the US Treasury’s Capital Purchase Program. In order to maintain Tower’s well-capitalized position, the merger agreement provides specific protections in the event of an increase in First Chester’s loan delinquencies prior to closing.
It is anticipated that the transaction will be completed during the second quarter of 2010, pending regulatory approvals, the approval of the shareholders of both Tower and First Chester, and the satisfaction of other closing conditions.
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