The Globe and Mail, Sinclair Stewart, 14 April 2006
Ed Clark has pulled the trigger on his third cross-border acquisition in less than two years, bucking conventional wisdom that U.S. expansion has become prohibitively expensive for Canadian banks.
TD Banknorth Inc., the Portland, Me.-based subsidiary of Toronto-Dominion Bank, announced yesterday it is buying Interchange Financial Services Corp. of Saddle Brook, N.J., for $481-million (U.S.) in cash.
Mr. Clark, TD's chief executive officer, acknowledged in an interview that the price wasn't cheap, but said the bank wanted to bolster its presence in the "sweet spot" of New Jersey's affluent Bergen county. The combination will make TD Banknorth the No. 5 player in this market, and the ninth-biggest bank in the state.
"I think these are fully priced deals. I don't think there's any doubt," Mr. Clark said. "The reality is, it's hard to buy these things for significantly better than that . . . That's the choice that people have to make, and I can understand how some people would say: 'Well, I don't ultimately believe that having a U.S. retail franchise works for me,' and that's certainly a legitimate point of view. In our view, we're saying it will."
TD Banknorth has 21 branches in Bergen, through its purchase last year of Hudson United Bancorp., while Interchange has 29. The bank expects to close between eight and 12 of these branches, and estimates it can reap cost savings of 50 per cent by cutting out some of the overlap between the two operations.
"It fits exactly with what we're trying to do, which is to move ourselves up," Mr. Clark said. "In the areas where we're trying to compete, can we get ourselves top leadership market share?"
Most importantly, it will help strengthen Hudson United, the New Jersey bank TD Banknorth acquired last summer for $1.9-billion. Hudson has had some well-documented regulatory troubles, and there have been concerns about the quality of its earnings.
Bill Ryan, who heads up TD Banknorth, said there will be no more acquisitions this year, as the company integrates Hudson and Interchange.
Interchange had $1.6-billion in assets and $1.3-billion in deposits at the end of last year. The company turned out a profit of $19.7-million on revenue of $89-million.
TD Banknorth is paying cash for the acquisition, which values Interchange at $23 a share -- a 21-per-cent premium to its closing price of $19.07 on the Nasdaq Stock Market yesterday.
To finance the deal, TD will increase its ownership stake in TD Banknorth by purchasing 13 million shares of its subsidiary, a chunk of stock worth about $405-million. TD purchased 51 per cent of Banknorth in 2004 for $5-billion (Canadian), and its position will climb to almost 59 per cent when the Interchange acquisition closes in the first quarter of 2007.
The transaction isn't expected to have an impact on Banknorth's profitability next year.
Ed Clark has pulled the trigger on his third cross-border acquisition in less than two years, bucking conventional wisdom that U.S. expansion has become prohibitively expensive for Canadian banks.
TD Banknorth Inc., the Portland, Me.-based subsidiary of Toronto-Dominion Bank, announced yesterday it is buying Interchange Financial Services Corp. of Saddle Brook, N.J., for $481-million (U.S.) in cash.
Mr. Clark, TD's chief executive officer, acknowledged in an interview that the price wasn't cheap, but said the bank wanted to bolster its presence in the "sweet spot" of New Jersey's affluent Bergen county. The combination will make TD Banknorth the No. 5 player in this market, and the ninth-biggest bank in the state.
"I think these are fully priced deals. I don't think there's any doubt," Mr. Clark said. "The reality is, it's hard to buy these things for significantly better than that . . . That's the choice that people have to make, and I can understand how some people would say: 'Well, I don't ultimately believe that having a U.S. retail franchise works for me,' and that's certainly a legitimate point of view. In our view, we're saying it will."
TD Banknorth has 21 branches in Bergen, through its purchase last year of Hudson United Bancorp., while Interchange has 29. The bank expects to close between eight and 12 of these branches, and estimates it can reap cost savings of 50 per cent by cutting out some of the overlap between the two operations.
"It fits exactly with what we're trying to do, which is to move ourselves up," Mr. Clark said. "In the areas where we're trying to compete, can we get ourselves top leadership market share?"
Most importantly, it will help strengthen Hudson United, the New Jersey bank TD Banknorth acquired last summer for $1.9-billion. Hudson has had some well-documented regulatory troubles, and there have been concerns about the quality of its earnings.
Bill Ryan, who heads up TD Banknorth, said there will be no more acquisitions this year, as the company integrates Hudson and Interchange.
Interchange had $1.6-billion in assets and $1.3-billion in deposits at the end of last year. The company turned out a profit of $19.7-million on revenue of $89-million.
TD Banknorth is paying cash for the acquisition, which values Interchange at $23 a share -- a 21-per-cent premium to its closing price of $19.07 on the Nasdaq Stock Market yesterday.
To finance the deal, TD will increase its ownership stake in TD Banknorth by purchasing 13 million shares of its subsidiary, a chunk of stock worth about $405-million. TD purchased 51 per cent of Banknorth in 2004 for $5-billion (Canadian), and its position will climb to almost 59 per cent when the Interchange acquisition closes in the first quarter of 2007.
The transaction isn't expected to have an impact on Banknorth's profitability next year.
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RBC Capital Markets, 13 April 2006
TD Banknorth Pays Full Price: Interchange Financial Services Corporation has agreed to be acquired by TD Banknorth Inc. in a cash transaction valued at $480.6 million, or $23 per IFCJ share, which is a 20.6% premium over the Thursday closing price of $19.07.
Full Value: IFCJ shareholders are receiving full value in our opinion at 16.4x estimated 2006 EPS, 1.6x stated book value, and 4.4x tangible book value, which compares with average multiples of 17.2x estimated EPS, 2.5x book value, and 3.3x tangible book value for the 25 largest deals since the beginning of 2004. The core deposit premium was 31% based upon year-end 2005 numbers.
Thoughts on IFCJ: We believe Interchange Financial Services Corporation's stock is fairly valued based upon the consideration to be paid by TD Banknorth. Our price target of $23 per share is based upon the purchase consideration in which shareholders will receive cash in the amount of $23 per IFCJ share. We rate the stock a Sector Perform with Above Average risk, as IFCJ shares trade approximately at our price target.
Company Description. Interchange Financial Services Corporation is a bank holding company for Interchange Bank, the 7th leading bank (by deposits) in Bergen County New Jersey. The company's bank subsidiary offers traditional commercial and retail banking services, including online banking and bill paying services through InterBank. Customers can also do their stock trading, obtain insurance services, and apply for a loan through Interchange Bank's Web site. Mutual Funds and Annuities are offered through Interchange's Investment Services Program. At the end of December 2005, the company had total assets of $1.6 billion and total deposits of $1.3 billion. Nearly two-thirds of its loans are made to commercial customers.
TD Banknorth Pays Full Price: Interchange Financial Services Corporation has agreed to be acquired by TD Banknorth Inc. in a cash transaction valued at $480.6 million, or $23 per IFCJ share, which is a 20.6% premium over the Thursday closing price of $19.07.
Full Value: IFCJ shareholders are receiving full value in our opinion at 16.4x estimated 2006 EPS, 1.6x stated book value, and 4.4x tangible book value, which compares with average multiples of 17.2x estimated EPS, 2.5x book value, and 3.3x tangible book value for the 25 largest deals since the beginning of 2004. The core deposit premium was 31% based upon year-end 2005 numbers.
Thoughts on IFCJ: We believe Interchange Financial Services Corporation's stock is fairly valued based upon the consideration to be paid by TD Banknorth. Our price target of $23 per share is based upon the purchase consideration in which shareholders will receive cash in the amount of $23 per IFCJ share. We rate the stock a Sector Perform with Above Average risk, as IFCJ shares trade approximately at our price target.
Company Description. Interchange Financial Services Corporation is a bank holding company for Interchange Bank, the 7th leading bank (by deposits) in Bergen County New Jersey. The company's bank subsidiary offers traditional commercial and retail banking services, including online banking and bill paying services through InterBank. Customers can also do their stock trading, obtain insurance services, and apply for a loan through Interchange Bank's Web site. Mutual Funds and Annuities are offered through Interchange's Investment Services Program. At the end of December 2005, the company had total assets of $1.6 billion and total deposits of $1.3 billion. Nearly two-thirds of its loans are made to commercial customers.
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Reuters, Jonathan Stempel, 13 April 2006
TD Banknorth Inc, a fast-growing northeast U.S. bank, said on Thursday it agreed to buy Interchange Financial Services Corp. for $480.6 million in cash, its second acquisition in affluent northern New Jersey this year.
TD Banknorth, majority-owned by Canada's Toronto-Dominion Bank, will pay $23 per share for Interchange, a 20.6 percent premium over the shares' Thursday closing price of $19.07 on the Nasdaq.
The transaction was announced after U.S. markets closed. Interchange shares, which fell 6 cents to $19.07 on Nasdaq during the day, rose $3.58, or 18.8 percent, to $22.65 after-hours on Inet. TD Banknorth shares on Thursday rose 23 cents to $29.31 on the New York Stock Exchange.
Based in Saddle Brook, New Jersey, Interchange operates 30 branches in Bergen and Essex counties. It ended 2005 with $1.6 billion of assets and $1.3 billion of deposits. The purchase will make TD Banknorth the ninth-largest bank in the state.
"They're a nice size for us, have a good commercial loan portfolio, and are in a large market with attractive demographics," said TD Banknorth Chief Executive William Ryan in an interview.
He said TD Banknorth is paying 22.1 times Interchange's estimated 2006 earnings, and 2.592 times book value.
In January, TD Banknorth paid about $1.9 billion for Mahwah's Hudson United Bancorp, adding more than 200 branches in New Jersey, Connecticut, New York and Pennsylvania.
TD Banknorth, based in Portland, Maine, now operates about 600 branches in eight northeast states.
"Banknorth has made a living on entering new markets through acquisitions, and building a presence through fill-in purchases," said Jim Ackor, an analyst at RBC Capital Markets in Portland, Maine.
TD Banknorth operates 102 New Jersey branches. Ryan said that to cut costs, it plans to close eight to 12 Interchange or former Hudson United branches located within about a mile of each other.
TD Banknorth will sell 13 million common shares at $31.17 each to TD Bank Financial, raising $405 million to help fund the Interchange purchase.
The Canadian company last year paid $4 billion for a 51 percent stake in TD Banknorth. The Interchange purchase will increase the percentage to 58.6 percent.
"Large mergers in Canada have been limited by the government, so that makes expansion of TD Banknorth (the Canadian bank's) major initiative for capital deployment," said Kevin Timmons, an analyst at C.L. King & Associates in Albany, New York.
The Interchange purchase is expected to close early in the first quarter of 2007 upon regulatory and Interchange shareholders' approval. TD Banknorth expects it won't affect 2007 earnings. TD Bank Financial expects it to add to profit slightly within one year.
Ryan is eyeing other mergers. "There are still a number of smaller banks in the metro New York/New Jersey area that have potential to be sold in the next two or three years," he said. "We've always been very aggressive acquirers, so we'll be in the mode of looking at them into 2007."
Keefe, Bruyette & Woods and the law firm Elias, Matz, Tiernan & Herrick LLP advised TD Banknorth. Goldman Sachs and the law firm Thacher Proffitt and Wood LLP advised Interchange.
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TD Banknorth Inc, a fast-growing northeast U.S. bank, said on Thursday it agreed to buy Interchange Financial Services Corp. for $480.6 million in cash, its second acquisition in affluent northern New Jersey this year.
TD Banknorth, majority-owned by Canada's Toronto-Dominion Bank, will pay $23 per share for Interchange, a 20.6 percent premium over the shares' Thursday closing price of $19.07 on the Nasdaq.
The transaction was announced after U.S. markets closed. Interchange shares, which fell 6 cents to $19.07 on Nasdaq during the day, rose $3.58, or 18.8 percent, to $22.65 after-hours on Inet. TD Banknorth shares on Thursday rose 23 cents to $29.31 on the New York Stock Exchange.
Based in Saddle Brook, New Jersey, Interchange operates 30 branches in Bergen and Essex counties. It ended 2005 with $1.6 billion of assets and $1.3 billion of deposits. The purchase will make TD Banknorth the ninth-largest bank in the state.
"They're a nice size for us, have a good commercial loan portfolio, and are in a large market with attractive demographics," said TD Banknorth Chief Executive William Ryan in an interview.
He said TD Banknorth is paying 22.1 times Interchange's estimated 2006 earnings, and 2.592 times book value.
In January, TD Banknorth paid about $1.9 billion for Mahwah's Hudson United Bancorp, adding more than 200 branches in New Jersey, Connecticut, New York and Pennsylvania.
TD Banknorth, based in Portland, Maine, now operates about 600 branches in eight northeast states.
"Banknorth has made a living on entering new markets through acquisitions, and building a presence through fill-in purchases," said Jim Ackor, an analyst at RBC Capital Markets in Portland, Maine.
TD Banknorth operates 102 New Jersey branches. Ryan said that to cut costs, it plans to close eight to 12 Interchange or former Hudson United branches located within about a mile of each other.
TD Banknorth will sell 13 million common shares at $31.17 each to TD Bank Financial, raising $405 million to help fund the Interchange purchase.
The Canadian company last year paid $4 billion for a 51 percent stake in TD Banknorth. The Interchange purchase will increase the percentage to 58.6 percent.
"Large mergers in Canada have been limited by the government, so that makes expansion of TD Banknorth (the Canadian bank's) major initiative for capital deployment," said Kevin Timmons, an analyst at C.L. King & Associates in Albany, New York.
The Interchange purchase is expected to close early in the first quarter of 2007 upon regulatory and Interchange shareholders' approval. TD Banknorth expects it won't affect 2007 earnings. TD Bank Financial expects it to add to profit slightly within one year.
Ryan is eyeing other mergers. "There are still a number of smaller banks in the metro New York/New Jersey area that have potential to be sold in the next two or three years," he said. "We've always been very aggressive acquirers, so we'll be in the mode of looking at them into 2007."
Keefe, Bruyette & Woods and the law firm Elias, Matz, Tiernan & Herrick LLP advised TD Banknorth. Goldman Sachs and the law firm Thacher Proffitt and Wood LLP advised Interchange.
