Englewood Cliffs, N.J.-based ConnectOne Bancorp Inc. agreed to acquire Bancorp of New Jersey Inc. in a cash-and-stock deal valued at approximately $113 million.
Bancorp of New Jersey shareholders will receive either 0.78 of a ConnectOne Bancorp common stock or $16.25 in cash for each share they own, with the deal consideration mix to be comprised of 80% in stock and 20% in cash. The deal values each Bancorp of New Jersey common share at $15.48 apiece, which represents a 12.6% premium based on the Aug. 15 closing price of $13.75. The deal value is also based on ConnectOne Bancorp's Aug. 15 closing price of $19.60.
The deal is expected to close in the first quarter of 2020. Upon closing, a Bancorp of New Jersey director will join the boards of ConnectOne Bancorp and ConnectOne Bank.
ConnectOne Bancorp said the acquisition would add about $800 million of deposits and loans, and it expects the deal to be about 5% accretive to its EPS, excluding the impact of potential revenue enhancement opportunities. The company said it expects the transaction to dilute its tangible book value per share by about 3% at closing, and it projects the earnback period of the dilution to be around 3.5 years, using the cross-over method and excluding contemplated revenue enhancements.
ConnectOne also said the deal would strengthen its scale in the New York metro market and also in New Jersey.
S&P Global Market Intelligence calculates the deal is 122.53% of common equity and 122.53% of tangible common equity and 19.37x earnings, on an aggregate basis. The deal value is 12.26% of assets, 14.88% of deposits and it has a tangible book premium to deposits of 2.74%.
S&P Global Market Intelligence valuations for bank and thrift targets in the mid-Atlantic region between Aug. 15, 2018, and Aug. 15, 2019, averaged 143.44% of book and 152.23% of tangible book and had a median of 16.93x last-12-months earnings, on an aggregate basis.
The deal has a one-day premium of 12.58% and a one-month premium of 12.34%.
ConnectOne Bancorp will expand in Bergen County, N.J., by nine branches to be ranked fourth with a 5.85% share of approximately $55.24 billion in total market deposits.
ConnectOne Bancorp had total assets of $6.11 billion and Bancorp of New Jersey had total assets of $924.7 million, both as of June 30, according to S&P Global Market Intelligence data. The pro forma combined company will have $7.0 billion in total assets, $5.4 billion in deposits and $5.9 billion in loans as of June 30.
The merger agreement requires Bancorp of New Jersey to pay ConnectOne a termination fee of $4.5 million in the event the merger is terminated because of a competing acquisition transaction. If ConnectOne fails to secure the requisite support of its shareholders, it will be required to pay Bancorp of New Jersey up to $750,000 for costs and legal expenses incurred in connection with the negotiation and preparation of deal.
Keefe Bruyette & Woods Inc. is ConnectOne Bancorp's financial adviser in the transaction, while Squire Patton Boggs (US) LLP is the legal counsel. Sandler O'Neill & Partners LP is Bancorp of New Jersey's financial adviser and Holland & Knight LLP is the legal counsel.