Independent Bank Corp. INDB has agreed to acquire Enterprise Bancorp, Inc. (“Enterprise”). The deal has been valued at roughly $562 million, to be paid through roughly 7.5 million shares and $27.1 million in cash.
This acquisition will deepen INDB’s footprint in demographically lucrative markets including northern Massachusetts and southern New Hampshire. It will also meaningfully expand wealth assets under administration in adjacent markets.
Jeffrey Tengel, president and CEO of Independent Bank Corp., stated, “We look forward to extending Rockland Trust’s footprint in northern Massachusetts, as well as entering the New Hampshire market. Together, our combined institution will bring expanded convenience and additional products and services to the communities we are proud to serve.”
Details of the Acquisition
Per the agreement, Independent Bank will pay $2 per share in cash and 0.6 shares of its common stock for each share of Enterprise. The merger agreement has been approved by the board of directors of both entities.
The deal is anticipated to be completed in the second half of 2025, subject to requisite regulatory approvals and the approval of Enterprise’s shareholders. Upon closure, Enterprise and its subsidiary Enterprise Bank will be merged into Independent Bank and its subsidiary, Rockland Trust Company, respectively.
Lowell, MA-based Enterprise Bancorp, founded in 1989, operates 27 full-service branches across Massachusetts and New Hampshire. As of Sept. 30, 2024, the firm had roughly $4.7 billion in assets, $3.9 billion in total loans and $4.2 billion in deposits.
Upon the completion of the deal, two directors from Enterprise will be appointed to INDB’s board and George Duncan, chairman of the board and Enterprise Bank's founding member will become an advisor to the independent board and Steven Larochelle, CEO of Enterprise Bank will serve as a consultant for Rockland Trust for a year.
The combined entity is anticipated to have roughly $25 billion in total assets, $18.2 billion in total loans and $19.6 billion in total deposits.
INDB’s Rationale Behind the Acquisition
This transaction is likely to improve INDB’s deposit mix through low-cost deposits with more than 85% of core deposits. Also, it will likely strengthen the company’s balance sheet and contribute to net interest margin expansion.
Independent Bank will likely benefit from expected cost-savings of 30% of Enterprise’s annual operating expense, 50% of which will be phased in 2025 and the rest will be realized thereafter. Also, one-time $61.2 million of pre-tax merger expenses are anticipated to be incurred by INDB.
The deal is anticipated to be roughly 16.2% accretive to INDB’s 2026 earnings per share, assuming the execution of cost savings. Further, the company expects a common equity tier 1 capital of 12.6% by 2026 year-end and a 20% internal rate of return.
Also, tangible book value is expected to dilute by 9.8% with an estimated earn-back period of approximately three years. Further, Independent Bank anticipates roughly 15.7% return on average tangible common equity and 1.4% return on average assets by 2026-end, adjusting for the phased-in cost savings.
Our Take on INDB’s Inorganic Expansion Effort
This move aligns with the company’s long-term inorganic growth strategy. INDB has successfully acquired and integrated six banks in the last decade, indicating its emphasis on strategic buyouts to expand the bank’s presence and capitalize on revenues and cost synergies.
Year to date, shares of Independent Bank have risen 7.4% compared with the industry’s growth of 6.1%.
Image Source: Zacks Investment Research
Currently, INDB carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Similar Steps by Other Banks
Last week, United Bancshares Inc. UBSI obtained the requisite regulatory approvals to acquire Piedmont Bancorp, Inc. The transaction is anticipated to be completed in early 2025, with system integration expected to be completed by the late first quarter of 2025, subject to customary closing requirements.
The deal is anticipated to be 7.6% and 8.3% accretive to UBSI’s 2025 and 2026 earnings per share, respectively, with a tangible book value earn-back period of 2.8 years.
Similarly, last month, Old National Bancorp. ONB announced its decision to acquire Bremer Financial Corp. The transaction is valued at $1.4 billion, with the consideration to be paid through 50 million shares of ONB and $315 million in cash.
This transaction is likely to improve ONB’s deposit mix through low-cost and granular deposits. This will also establish the company as the premier regional bank in the Midwest, deepening its footprint in lucrative markets. The deal will meaningfully expand wealth management and contribute to high-value and lower-volatility revenues.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
