What happened
Shares of Bryn Mawr Bank (BMTC), a small bank in Pennsylvania with $5.4 billion in assets, shot up more than 14% today after it announced that it will be acquired by WSFS Financial (WSFS -3.79%). Shares of WSFS closed the day slightly higher.
So what
WSFS Financial, a bank based in Wilmington, Delaware, with nearly $14 billion in assets, will acquire Bryn Mawr in an all-stock transaction for more than $976 million, valuing Bryn Mawr at roughly $48.55 per share.
The purchase price values Bryn Mawr at a rich multiple of roughly 229% of tangible book value, which is a company's equity minus goodwill and intangible assets.
![Picture of building with the word bank on it.](https://g.foolcdn.com/image/?url=https%3A%2F%2Fg.foolcdn.com%2Feditorial%2Fimages%2F617548%2Fgeneric-bank-getty.jpg&op=resize&w=700)
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The combined banks will have nearly $20 billion in total assets and $43 billion in assets under management and assets under administration. As part of the deal, Bryn Mawr's CEO, Frank Leto, and two Bryn Mawr directors will join the WSFS board of directors.
Now what
The cost to purchase Bryn Mawr will dilute the WSFS tangible book value by 6.1% and take about 3.2 years to fully earn back. This isn't exactly an insignificant amount of dilution, and some investors are likely to consider the earn-back period to be too lengthy.
But the acquisition combines two really strong-performing banks and creates an institution with more scale and a diversified revenue stream. Nearly 30% of the combined banks' total revenue will come from core fee income.
The move also helps WSFS significantly grow its deposit market share in the Philadelphia-Wilmington-Camden metropolitan statistical area, so overall I think the move will work out great long term.