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Hampden County, Mass.-based banks partner up in $110M deal

Westfield, Mass.-based Westfield Financial Inc. ($1.34 billion) is acquiringChicopee, Mass.-based ChicopeeBancorp Inc. ($678.6 million), the parent of Chicopee Savings Bank, in a deal worth roughly $110million in the aggregate, according to an April 4 news release.

Under the terms of the agreement, Chicopee shareholders willbe entitled to receive 2.425 Westfield common shares for each Chicopee commonshare, equal to $20.42 per share, based on the closing price for Westfieldcommon stock on April 4. The common stock options of Chicopee will be convertedinto Westfield options with the same relative economic value and expirationdate.

Upon closing, Westfield shareholders will own approximately59% of stock in the combined company, and Chicopee shareholders will ownapproximately 41%.

On a per-share basis, SNL calculates the to be 119.7% of bookand tangible book, 34.2x earnings and 34.2x last-12-months core earnings. Theprice is 21.84% of deposits, 16.32% of assets and 41.0x estimated EPS, whilethe tangible book premium to core deposits ratio is 5.26%.

The one-day premium is 15.84%, based on Chicopee's closingstock price of $17.71 per share on April 1, while the one-month premium is13.91%, based on Chicopee's closing stock price of $18.01 per share on March 4.

SNL's valuations for bank and thrift targets in theNortheast between April 4, 2015, and April 4, 2016, averaged 134.06% of book,135.09% of tangible book and had a median of 41.88x LTM earnings, on anaggregate basis, and averaged 129.43% of book, 129.43% of tangible book and hada median of 43.69x LTM earnings, on a per-share basis.

The deal is expected to close in the fourth quarter, subjectto the approval of both Westfield and Chicopee shareholders as well as ofregulators. The transaction is anticipated to be significantlyaccretive to the earnings per share of the combined institution, beginning inthe first full year. The initial tangible book value dilution of about 6% isexpected to be earned back within five years, utilizing the crossover method,according to the news release.

Following the close of the transaction, the combined bankwill do business under the Westfield Bank name, with the holding company to berenamed Western New England Bancorp with the Nasdaq trading symbol WNEB.It will have $2.1 billion in total assets, tangible equity of more than $215million and 21 branch locations.

The combined bank is expected to be the largest locallymanaged bank in Hampden County, Mass., and the second-largest bank in thecounty in terms of deposit market share. According to SNL data,Toronto-Dominion Bankhad the top market share in the county in 2015.

In Massachusetts, the merger will see Westfield Financialenter Hampshire County with two branches, to be ranked No. 14 with a 0.76%share of approximately $3.94 billion in total market deposits, and will expandin Hampden County by seven branches, to be ranked second with a 14.28% share ofapproximately $9.31 billion in total market deposits, according to SNL data.

Following deal closing, Westfield President and CEO JamesHagan will be president and CEO of the combined company, while WestfieldChairman Donald Williams will serve as chairman of the board. ChicopeeChairman, President and CEO William Wagner will hold the vice chairman's seatand join the combined company's executive management team. Also, fouradditional directors of Chicopee will join the Westfield board.

Griffin Financial Group LLC acted as financial adviser toWestfield Financial, with Richard Quad as lead banker, and rendered a fairnessopinion to its board of directors, while Hogan Lovells US LLP acted as legalcounsel. Piper Jaffray & Co. acted as financial adviser to Chicopee Bancorpand rendered a fairness opinion to its board, while Luse Gorman PC acted aslegal counsel.

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