Cambridge Bancorp to merge into Eastern Bankshares in $528M deal

Cambridge, Mass.-based Cambridge Bancorp, the parent company of Cambridge Trust Co., agreed to merge with and into Boston-based Eastern Bankshares Inc., the holding company for Eastern Bank, in an all-stock deal.

Based on the closing price of Eastern Bankshares' stock Sept. 18, the deal is valued at about $528 million. The aggregate consideration reflects 114% of Cambridge Bancorp's tangible book value and a 24% premium to Cambridge Bancorp's 30-day volume weighted average price, according to a news release.

Also, Eastern Bankshares' wholly owned subsidiary, Eastern Insurance Group LLC, agreed to sell its insurance operations to Arthur J. Gallagher & Co. for roughly $510 million in cash.

The net gain on the sale of the insurance operations is expected to be about $260 million. Current leadership and employees of Eastern Insurance will join Arthur J. Gallagher.

The Eastern Bankshares-Cambridge Bancorp merger is expected to be completed during the first quarter of 2024, and the insurance transaction will close in the fourth quarter of 2023.

The merger will create a company with roughly $27.1 billion in total assets, $18 billion in total loans, $22.6 billion in deposits and $7.6 billion in client assets under management and administration. The combined wealth management and private banking divisions will operate under the Cambridge Trust brand and leadership.

Upon deal closing, Eastern Bankshares will expand in Massachusetts by 19 branches to be ranked fifth with a 3.96% share of approximately $579.55 billion in total market deposits and will expand in New Hampshire by six branches to be ranked No. 11 with a 1.85% share of approximately $51.04 billion in total market deposits, according to S&P Global Market Intelligence data.

At the announcement, S&P Global Market Intelligence calculates the deal value to be 98.94% of common equity, 114.48% of tangible common equity, 11.83% of deposits, 9.57% of assets and 11.08x earnings. The tangible book premium-to-core deposits ratio is 1.65%.

S&P Global Market Intelligence valuations for bank and thrift targets in the Northeast region between Sep. 19, 2022, and Sep. 19, 2023, averaged 162.48% of book and 183.46% of tangible book and had a median of 12.59x last-12-months earnings, on an aggregate basis, and averaged 161.89% of book and 182.79% of tangible book and had a median of 12.56x LTM earnings, on a per-share basis.

Under the terms of the merger agreement, each Cambridge Bancorp common share will be exchanged for 4.956 Eastern Bankshares common shares. Eastern Bankshares expects to issue about 39.4 million common shares in the merger.

Cambridge Bancorp Chairman, President and CEO Denis Sheahan will become CEO of Eastern Bankshares and will join Eastern Bankshares' board. Three Cambridge Bancorp directors will also be elected to Eastern Bankshares' board.

Eastern Bankshares President Quincy Miller will be promoted to vice chair, president and COO of the company. Sheahan and Miller will report directly to Bob Rivers, who will serve as executive chair and chair of the Eastern Bankshares board.

Eastern Bankshares expects the merger and the insurance transaction to be about 20% accretive to its 2024 earnings per share and about 7.5% dilutive to tangible book value per share, with an expected earnback period of about 2.75 years and an internal rate of return of about 20%.

On a pro forma basis for Dec. 31, Eastern Bankshares said it anticipates maintaining "robust" capital levels with a projected common equity Tier 1 ratio of roughly 14.5%.

If the merger deal is terminated under certain circumstances, a termination fee of $21 million will be payable by either Cambridge Bancorp or Eastern Bankshares, as applicable.

On the proposed Eastern Bankshares-Cambridge Bancorp merger, BofA Securities Inc. served as financial adviser and Hogan Lovells US LLP was legal counsel to Cambridge Bancorp. J.P. Morgan Securities LLC served as financial adviser and Nutter McClennen & Fish LLP was legal counsel to Eastern Bankshares.

On the insurance transaction, Piper Sandler & Co. served as financial adviser and Nutter McClennen & Fish served as legal counsel to Eastern Bankshares.

To use S&P Capital IQ Pro's branch analytics tools to compare market overlap, click here. To create custom maps, click here.