First Niagara Financial Group Inc. got a chilly New England welcome as it set about acquiring NewAlliance Bancshares Inc., facing lawsuits, an inquiry by Connecticut”™s attorney general and even a catcall or two from the mayor of New Haven.
Buffalo, N.Y.-based First Niagara says the $1.5 billion deal would catapult it to becoming one of the 25 largest banks in the nation with some $29 billion in total assets. NewAlliance has $8.7 billion in assets, including $4.9 billion in loans, and $5.1 billion in deposits across nearly 90 branches in Connecticut and Massachusetts. The company employs 1,200 people.
First Niagara is paying a 24 percent premium for NewAlliance, based on the value of NewAlliance stock as of Aug. 19. The companies hope to complete the deal early in the second quarter next year, at which point NewAlliance branches would be renamed under the First Niagara brand.
Ollie Sommer, First Niagara”™s head of corporate development with responsibility for acquisitions, previously was a consultant with Aston Associates Inc., a bank advisory firm located at the time in Stamford.
NewAlliance traces its history to the middle of the 19th century through New Haven Savings Bank, which converted from mutual to stock ownership six years ago.
In an unusual move, New Haven Mayor John DeStefano crashed a merger conference call for investment analysts to query First Niagara CEO John Koelmel and NewAlliance CEO Peyton Patterson about the deal.
“The city ”¦ opposed New Haven Savings Bank”™s demutualization back in 2004 largely against this day, when we might see (a) purchase by a larger institution,” DeStefano said. “I see that as ultimately a loss of local decision-making, and (so) some understanding of our market ”¦ Why (should) I see this in my community”™s interest?”
Koelmel defended his company”™s record on the community front, with the company pledging to add $7.5 million to its philanthropic foundation to support charities in NewAlliance”™s market territory.
“Whether it would be helping Gov. David Paterson reenergize the Empire State Games across the entire state of New York, or the other activities that we just do day in and day out, we”™re all about community,” Koelmel told DeStefano. “We take pride at being a community bank and I assure you there will be not only no back up, but you”™ll see ample evidence of even stronger momentum going forward.”
Before cutting off DeStefano to move to other questions, Koelmel told the mayor he looked forward to a meeting in New Haven.
“I”™m sure you”™ll enjoy that,” DeStefano said.
For his part, Connecticut Attorney General Richard Blumenthal is focused on job cuts, and in a letter to Patterson and Koelmel demanded several pieces of information from the companies. Blumenthal expressed concern the merger is part of a plan for First Niagara to make itself more attractive to a larger bank. Among other items, he wants specifics on any job cuts that could be in the offing and what compensation senior executives stand to gain as a result of the deal.
In a letter to employees filed with the U.S. Securities and Exchange Commission, NewAlliance confirmed it expects job cuts following the planned merger likely among back-office staff where the companies have overlapping personnel.
“Bottom line, as in any merger there will be some job reductions, but they will be contained just to certain areas of the bank”™s back-office functions,” the bank stated. “Every effort will be made to identify alternative employment opportunities within the bank for those affected by redundancies.”
