Berkshire Hills Bancorp and Brookline Bancorp said Monday they struck a $1.1 billion, all-stock deal in which Brookline would merge into Berkshire.
UPDATE: This article includes additional comments from executives of both companies made during a call with analysts. It also includes additional detail from the companies' joint presentation.
Two storied Boston banks whose roots date to the 1800s said they would combine forces and create a top 10 financial institution by market share in New England's largest metropolitan area.
The $11. 6 billion-asset Berkshire Hills Bancorp and the $11.7 billion-asset Brookline Bancorp said Monday they struck a $1.1 billion, all-stock deal in which Brookline would merge into Berkshire. It would create a regional bank with nearly $24 billion of assets, and it would rank as the No. 8 bank by deposit market share in the Greater Boston area, according to Federal Deposit Insurance Corp. data.
It would have about $18 billion of deposits and $19 billion of loans. The larger company would span five Northeast states with nearly 150 branches.
"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," Berkshire Chairman David Brunelle said in a press release.
Brunelle would chair the merged company's board, which would be evenly split between Berkshire and Brookline directors.
In connection with the deal, expected to close by late 2025 and as soon as September, Berkshire plans to issue $100 million of its common stock at $29.00 per share. Proceeds from the capital raise were expected to support the pro forma bank's balance sheet and regulatory capital ratios.
Berkshire shareholders would own about 51% of the company, while Brookline's stockholders would own 45%, and investors in new shares would own the remaining outstanding shares.
"This uniquely complementary" merger "combines Berkshire's stable funding base in smaller cities and rural communities with Brookline's strong lending presence in larger and faster-growing markets" such as Boston, New York City and Providence, Rhode Island, Berkshire President and CEO Nitin Mhatre said on a call with analysts to discuss the deal.
Aside from Boston, there is no substantial revenue overlap between the two companies, he said. "To that extent," Mhatre said, "the revenue engines continue to move forward and accelerate."
The merged company would trade on the New York Stock Exchange, with a new holding company name and ticker symbol to be announced prior to closing. The combined bank would also operate under a new name.
Berkshire's shares at midday were down about 1% to around $29.80, while Brookline's stock was near even at $12.55.
"Today marks the beginning of a new chapter for both our organizations," Brookline Chairman and CEO Paul Perrault said on the call. Perrault would become president and CEO of the combined bank. Mhatre would not join the company's management team. Neither bank immediately responded to requests for more information.
Berkshire expects to cut 12.6% of the combined bank's annual operating costs. It projected $93 million of merger-related charges.
After cost savings, it expects the deal to prove 40% accretive to 2026 earnings per share. Berkshire expects to earn back any dilution of its tangible book value within three years.
Jake Civiello, an analyst at Janney Montgomery Scott, said his first take on the deal was "positive," though he did caution that mergers of equals can prove tricky, given executive egos and inevitable challenges in trying to mutually meld two company's cultures.
"While the integration risk and logistics of a combination such as this will be head-spinning, we believe the improved economies of scale and efficiency should ultimately win out," Civiello said.
Berkshire hired Mhatre, a former executive at Webster Bank, in 2021. He was Berkshire's third CEO in as many years. He took over a company bogged down by investor concerns about senior leadership. Berkshire lost more than $500 million in 2020 as its nonperforming assets climbed amid the coronavirus pandemic's early fallout.
Under Mhatre, however, the bank has shored up credit quality issues, curbed costs via branch sales and returned to consistent profitability. Mhatre has emphasized investments in technology.
Berkshire reported third-quarter net income of $37.5 million, up from $19.5 million a year earlier.
Brookline reported third-quarter net income of $20.1 million, compared with $22.7 million a year earlier. The bank has consistently posted annual profits throughout this decade.
The Berkshire-Brookline announcement marked the sixth-largest banking deal this year by value, according to S&P Global Market Intelligence data. It also was the second substantial M&A transaction in the Boston area this month.
Rockland, Massachusetts-based Independent Bank Corp. said it would acquire Enterprise Bancorp in suburban Boston in a cash-and-stock deal valued at $562 million. The $19.4 billion-asset Independent, parent of Rockland Trust Co., expects to close the buyout of the $4.7 billion-asset, Lowell, Massachusetts-based Enterprise in the second half of 2025.
