M&T Bank has agreed to snap up Connecticut-based People’s United Financial in an all-stock deal worth $7.6 billion. People’s United shares jumped 14.9% on Feb. 22, while shares of New York-based regional bank rose 3.5%.
The deal is expected to be immediately accretive to M&T Bank’s (MTB) tangible book value per share. Also, EPS accretion of 10-12% is anticipated in 2023, including estimated annual cost synergies of $330 million.
Per the terms of the deal, shareholders of People’s United (PBCT) will receive 0.118 shares of M&T Bank common stock for each share held. The transaction, which awaits both companies’ shareholder approval and certain regulatory approvals, is likely to close in the fourth quarter of this year.
Upon completion of the deal, existing People’s United shareholders will own 28% of the combined entity.
The combined company will have assets worth $200 billion with a branch network of 1,100 branches and more than 2,000 ATMs. (See M&T Bank stock analysis on TipRanks)
M&T Bank CEO Rene Jones said, “In People’s United, we have found a partner with an equally long history of serving and supporting customers, businesses and communities.”
“Combining our common legacies and our complementary footprints will strengthen our ability to serve our communities and customers, and provide solutions that make a difference in people’s lives,” he added.
Following the deal announcement, Wells Fargo analyst Christopher Spahr increased the stock’s price target to $160 (3.1% upside potential) from $150 and maintained a Hold rating. The analyst said, “The deal is logical strategically as it fills in the Buffalo-Baltimore-Boston triangle and M&T also paid a less than average purchase premium.”
Wall Street analysts are cautiously optimistic on the stock’s outlook. The Moderate Buy consensus rating breaks down into 4 Buy ratings versus 5 Hold ratings. The average analyst price target stands at $153.50 and implies downside potential of more than 1% to current levels over the next 12 months. That’s after shares jumped almost 33% over the past three months.