Shares of Boston-based Meridian Bancorp (NASDAQ:EBSB) rose by more than 16% as of 10:05 a.m. EDT today, after the company announced yesterday that it will be acquired by competitor Independent Bank Corp. (NASDAQ:INDB).
Independent Bank Corp., the holding company of Rockland Trust, is a $13.8 billion asset bank mostly operating in parts of Massachusetts. Meridian Bancorp, the holding company of East Boston Savings Bank, is a $6.5 billion asset bank largely located in Boston and the surrounding area.
Independent plans to pay $1.15 billion for Meridian, valuing the bank at $21.89 per share, which is a roughly 23% premium over Meridian's closing share price yesterday. The price also values Meridian at 150% of its tangible book value (equity minus intangible assets and goodwill).
Together, the pro forma institution will have roughly $20 billion in assets and hold the second-largest deposit market share in the Boston metropolitan statistical area and in Massachusetts of any locally headquartered bank.
The deal looks very financially attractive for Independent. The purchase of Meridian will be immediately accretive to its tangible book value by roughly 8%, meaning it grows the bank's equity right away. Investors typically like to see this.
Independent also expects the deal to grow its earnings from a stand-alone bank by 23% once the transaction is complete in 2022.
Considering the financially attractive metrics of the deal, I would expect shares of Meridian to eventually get to at least the $21.89 the deal values the bank at.