-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NL98ROB/zjcf7AdkoyshC/P5wpeQydqvVBZR1Btq54YAbvhYiICEGcvJx+GZTXju fAZNXFFXYk7dn9KbWIiTXQ== 0000950135-99-003045.txt : 19990603 0000950135-99-003045.hdr.sgml : 19990603 ACCESSION NUMBER: 0000950135-99-003045 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990601 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990602 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLES HERITAGE FINANCIAL GROUP INC CENTRAL INDEX KEY: 0000829750 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 010437984 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-16947 FILM NUMBER: 99639117 BUSINESS ADDRESS: STREET 1: ONE PORTLAND SQ STREET 2: P O BOX 9540 CITY: PORTLAND STATE: ME ZIP: 04112 BUSINESS PHONE: 2077618500 MAIL ADDRESS: STREET 1: P O BOX 9540 CITY: PORTLAND STATE: ME ZIP: 04112-9540 8-K 1 PEOPLES HERITAGE FINANCIAL GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 June 1, 1999 - -------------------------------------------------------------------------------- (Date of earliest event reported) Peoples Heritage Financial Group, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maine 0-16947 01-0437984 - ---------------------------- ------------------------ ------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) P.O. Box 9540, One Portland Square, Portland, Maine 04112-9540 - --------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (207) 761-8500 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 2 ITEM 5. OTHER EVENTS On June 2, 1999, Peoples Heritage Financial Group, Inc. ("PHFG") announced that it and Banknorth Group, Inc. (the "Company") had entered into an Agreement and Plan of Merger, dated as of June 1, 1999 (the "Agreement"), which sets forth the terms and conditions pursuant to which the Company would be merged with and into PHFG (the "Merger") and PHFG would change its name to "Banknorth Group, Inc." The Agreement provides, among other things, that as a result of the Merger, each outstanding share of common stock of the Company (subject to certain exceptions) will be converted into the right to receive 1.825 shares of PHFG's common stock, plus cash in lieu of any fractional share interest. Consummation of the Merger is subject to a number of conditions, including (i) the approval of the Agreement and the Merger by the shareholders of PHFG and the Company, (ii) the receipt of requisite regulatory approvals, (iii) receipt by the parties of an opinion of counsel as to certain tax consequences of the Merger, (v) receipt by the parties of letters from their independent public accountants stating their opinion that the Merger shall qualify for pooling-of-interests accounting treatment and (v) satisfaction of certain other conditions. In connection with the Agreement, PHFG and the Company entered into a Stock Option Agreement, dated as of June 1, 1999 (the "Company Stock Option Agreement"), pursuant to which the Company granted PHFG an option (the "Company Option") to purchase up to 4,621,085 shares of the Company's common stock (subject to adjustment as set forth therein), which represents 19.9% of the Company's outstanding shares of common stock, at a purchase price of $26.80 per share (subject to adjustment as set forth therein). The Company Option will become exercisable upon the occurrence of certain events, as specified in the Company Stock Option Agreement, none of which has occurred as of June 1, 1999. In connection with the Agreement, PHFG and the Company also entered into a Stock Option Agreement, dated as of June 1, 1999 (the "PHFG Stock Option Agreement"), pursuant to which PHFG granted the Company an option (the "PHFG Option") to purchase up to 20,820,000 shares of PHFG's common stock (subject to adjustment as set forth therein), which represents 19.9% of PHFG's outstanding shares of common stock, at a purchase price of $19.20 per share (subject to adjustment as set forth therein). The Option will become exercisable upon the occurrence of certain events, as specified in the PHFG Stock Option Agreement, none of which has occurred as of June 1, 1999. In connection with the Agreement, (i) the Company adopted an amendment to its Rights Plan, dated as of June 1, 1999, which generally provides that the Agreement and the Company Stock Option Agreement and the transactions contemplated thereby shall have no consequences for purposes of such Rights Plan, and (ii) PHFG adopted a similar amendment to its Rights Plan with respect to the Agreement and the PHFG Stock Option Agreement. The press release issued by PHFG and the Company with respect to the announcement of the transaction described herein is attached hereto as Exhibit 99.1 and is hereby incorporated herein by reference in its entirety, except that it is estimated that the effect of the Merger will be accretive to earnings of the resulting company by four cents per share and five cents per share in 2001 and 2002, respectively, and not three cents per share and four cents per share in these respective years as stated in such press release. Also attached as Exhibit 99.2 and incorporated herein by reference is a presentation given by PHFG to investment analysts on June 2, 1999. 2 3 The press release and the analysts presentation incorporated herein by reference contain forward-looking statements with respect to the financial condition, results of operations and business of the surviving corporation upon consummation of the Merger, including statements relating to: (a) the estimated cost savings that will be realized from the Merger; (b) the estimated impact on results of operations of the Merger and (c) the restructuring charges expected to be incurred in connection with the Merger. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) estimated cost savings from the Merger cannot be fully realized within the expected time frame; (2) revenues following the Merger are lower than expected; (3) competitive pressure among depository institutions increases significantly; (4) costs or difficulties related to the integration of the businesses of PHFG and the Company are greater than expected; (5) changes in the interest rate environment reduce interest margins; (6) general economic conditions, either nationally or in the markets in which the surviving corporation will be doing business, are less favorable than expected; or (7) legislation or changes in regulatory requirements adversely affect the businesses in which the surviving entity would be engaged. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Not applicable. (b) Not applicable. (c) The following exhibits are included with this Report: Exhibit 2.1 Agreement and Plan of Merger, dated as of June 1, 1999, between PHFG and the Company(1) Exhibit 10.1 Stock Option Agreement, dated as of June 1, 1999, between PHFG (as grantee) and the Company (as issuer)(1) Exhibit 10.2 Stock Option Agreement, dated as of June 1, 1999, between PHFG (as issuer) and the Company (as grantee)(1) Exhibit 10.3 Form of letter agreement between affiliates of the Company and PHFG(1) Exhibit 10.4 Form of letter agreement between affiliates of PHFG and PHFG(1) - ----------------------------- (1) To be filed by amendment 3 4 Exhibit 99.1 Press Release, dated June 2, 1999 Exhibit 99.2 Analysts Presentation Exhibit 99.3 Amendment, dated as of June 1, 1999, to the Rights Agreement, dated as of November 27, 1990 and amended and restated as of September 4, 1998, between the Company and Registrar and Transfer Company, as Rights Agent.(1) Exhibit 99.4 Amendment, dated as of June 1, 1999, to the Rights Agreement, dated as of September 12, 1989, between PHFG and American Stock Transfer & Trust Company, as Rights Agent (1) - ----------------- (1) To be filed by amendment. 4 5 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PEOPLES HERITAGE FINANCIAL GROUP, INC. By: /s/ Peter J. Verrill -------------------------------------------- Name: Peter J. Verrill Title: Executive Vice President, Chief Financial Officer and Treasurer Date: June 2, 1999 5 EX-99.1 2 PRESS RELEASE DATED 2-JUNE-1999 1 EXHIBIT 99.1 For Immediate Release For Further Information: At Peoples Heritage, contact: At Banknorth, contact: Brian Arsenault, SVP, Corp. Communications William H. Chadwick, President (207) 761-8517 and CEO (802) 860-5560 Peoples Heritage to Acquire Banknorth and Create a $17 Billion Banking Company Extends Franchise to Vermont and Upstate New York Banknorth Name to be Retained (Conference call re this announcement at 2 p.m., eastern time, today, June 2, 1999. Conference call telephone number: 1-800-946-0742, confirmation code 704970) Portland, Maine, June 2, 1999 - Peoples Heritage Financial Group, Inc. (NASDAQ:PHBK) announced today that it has reached a definitive agreement to acquire Banknorth Group, Inc. (NASDAQ:BKNG) in a transaction valued at $780.7 million. The acquisition will create a $17 billion multi-state banking and financial services company. The transaction will provide the Company its initial entry into Vermont and Upstate New York while expanding its presence in Massachusetts and New Hampshire. Peoples Heritage, headquartered in Portland, Maine, currently has the largest bank deposit market share in Maine and New Hampshire, the eighth largest market share in Massachusetts and a bank in north-central Connecticut. William J. Ryan, Peoples Heritage Chairman, President and Chief Executive Officer, said that his Company will take on the Banknorth name. "Our new name will more clearly represent our presence in every New England state except Rhode Island and our entry into Upstate New York," said Mr. Ryan. "We also hope to send the market a clear message that we are truly a commercial banking company and not a traditional thrift." 2 "Geographically, we are executing a natural, contiguous extension of our franchise which makes us the dominant community banking franchise in virtually all of New England." Under the terms of the definitive agreement, shareholders of Banknorth will receive 1.825 shares of Peoples Heritage common stock for each whole share of Banknorth common stock plus cash in lieu of any fractional share interest. Approximately 42.9 million shares of Peoples Heritage stock will be issued in the transaction, including shares issuable upon the exercise of substitute stock options. The exchange will be tax free and accounted for as a pooling of interests. Based on a closing price of $18.00 per share of Peoples Heritage on June 1, 1999, the cash equivalent value of the deal is $32.85 for each share of Banknorth stock. The price equates to 2.35 times the book value of Banknorth at March 31, 1999 and 14.6 times estimated 1999 earnings per share. Under the terms of the definitive agreement, a 21-member Board of Directors of the resulting company will include six of the current directors of Banknorth. "We are pleased to achieve this affiliation with Peoples Heritage which, we believe, serves the long-term interests of our shareholders, and affirms our commitment to serving the banking needs of customers throughout our market area - -- from first-time homeowners to small businesses, from families buying and insuring an automobile to those customers planning for retirement," said William H. Chadwick, President and Chief Executive Officer of Banknorth. "As giant banks continue to emerge, it is important that institutions with the community banking style of the "new" Banknorth be here to serve `Main Street' New England and Upstate New York. The agreement is subject to the approval of the shareholders of both companies and requisite regulatory approvals. It is expected that the transaction will be closed by year-end. The operational integration of the two companies is expected to be completed during the second quarter of 2000. As part of the agreement, each party provided the other an option to purchase 19.9 percent of its outstanding common stock under certain circumstances. Due diligence is to be completed by both parties within a week. The transaction is expected to be accretive to earnings during the first full 12 months following the operational integration. For calendar year 2000, the transaction is expected to be 4 cents dilutive because anticipated cost savings will be realized for only about half the year while the additional shares will be issued for the full year. In 2001, the transaction is estimated to be accretive by 3 cents per share and in 2002 by 4 cents per share. Peoples Heritage had $12.6 billion in assets at March 31, 1999. It operates Peoples Heritage Bank in Maine, Bank of New Hampshire throughout the state, Family/SIS Bank in Massachusetts and Glastonbury Bank & Trust in Connecticut. The Company also operates 2 3 subsidiaries in insurance, investments, trust services, mortgage banking and equipment leasing; and has 221 banking offices and 287 ATMs. Banknorth Group had total assets of $4.4 billion at March 31, 1999. It operates eight community banks, The Stratevest Group, a $4.0 billion investment management company, and Banknorth Mortgage Company, Inc. It operates 101 banking offices and 145 ATMs in Massachusetts, New Hampshire, Vermont, and Upstate New York. (This press release contains certain forward-looking statements with respect to the financial condition, results of operation and business of the Company following the completion of the acquisition that are subject to various factors which could cause actual results to differ materially from such projections or estimates. Such factors include, but are not limited to, the possibility that anticipated cost savings and revenue enhancements might not be realized and that adverse general economic conditions or an adverse interest rate environment could develop. A current report on Form 8-K filed on or about June 2, 1999 discloses these factors more fully.) (end) 3 EX-99.2 3 ANALYSTS PRESENTATION 1 Exhibit 99.2 PEOPLES HERITAGE FINANCIAL GROUP, INC. AND BANKNORTH GROUP, INC. COMBINE TO FORM: BANKNORTH GROUP, INC. THE PREMIER COMMUNITY BANK FRANCHISE IN THE NEW ENGLAND REGION June 2, 1999 2 DOMINANT COMMUNITY BANK FRANCHISE Adds second largest Vermont market share Fills in central and western Massachusetts Provides entry to upstate New York Expands New Hampshire franchise Franchise Map 3 DOMINANT COMMUNITY BANK FRANCHISE PRO FORMA --------------------------------------------------------- DEPOSITS (a) BRANCHES MARKET SHARE (a) RANK Maine $2,797,553 74 22.02% 1 New Hampshire 3,381,251 95 19.48 1 Massachusetts (b) 2,979,404 82 5.95 2 Vermont 1,519,803 36 20.86 2 New York (b) 925,005 26 3.73 10 Connecticut (b) 236,912 7 0.95 15 (a) SNL Branch Migration DataSource (b) Market share and rank are only for counties where pro forma company has a presence 4 OVERVIEW - CONTINUATION OF A WINNING STRATEGY CONSISTENT WITH PEOPLES HERITAGE ACQUISITION PHILOSOPHY Quality organization with leading market position Perfect expansion for PHBK franchise: Vermont markets are similar to Maine, PHBK KNOWS how to bank rural markets Upstate New York has many of the same attributes as current PHBK markets and many of the competitors that PHBK has successfully competed with in the past Greatly improves PHBK's Western Massachusetts franchise, Now #2 in market share where the pro forma company has a presence Favorable impact on loan mix, funding, net interest margin and credit quality Accretive to GAAP and Cash EPS with no revenue enhancements 5 A GREAT FRANCHISE WITH MARKET POTENTIAL
MARKET 2000 ASSETS CAP ROA (1) ROE(1) P/E(2) ------ --- ------- ------ ------ (Dollars in Millions) PRO FORMA BANKNORTH(3) $16,933 $2,646 1.23 16.87 10.2x M&T Bank Corporation 20,285 4,045 1.33 16.49 14.6x North Fork Bancorporation, Inc. 11,221 2,912 1.90 24.54 11.8x Sovereign Bancorp, Inc. 23,188 2,116 0.77 14.29 9.8 x Valley National Bancorp 5,706 1,608 1.73 17.17 14.1x Keystone Financial, Inc. 6,830 1,548 1.21 13.35 14.1x Hudson United Bancorp 7,046 1,227 1.46 22.23 11.2x Commerce Bancorp, Inc. 5,634 1,106 1.10 18.08 15.5x Webster Financial Corporation 8,849 1,044 0.92 15.47 11.1x - ----------------------------- ------- ------ ---- ----- ------ MEDIANS(4) 1.27 16.83 12.9X
(1) First quarter 1999 operating (2) First Call consensus estimates for group, pro forma consensus estimate for Banknorth (3) Pro forma company, PHBK and BKNG (4) Excludes Banknorth 6 TRANSACTION SUMMARY FIXED EXCHANGE RATIO: 1.825 PHBK shares for each BKNG share PRICE PER SHARE: $32.85 per BKNG share* TRANSACTION VALUE: $773.2 million ACCOUNTING / TAX TREATMENT: Pooling of Interests / Tax Free Exchange CROSS LOCK-UP OPTION: 19.9% WALKAWAY: Down 20% absolute and down 20% relative to the NASDAQ Bank Index ESTIMATED ONE-TIME MERGER COSTS: $40.5 million after tax COMPANY NAME: Banknorth Group, Inc. BOARD OF DIRECTORS: Banknorth 6 Peoples Heritage 15 * Based on PHBK's closing price per share of $18.00 on June 1, 1999 7 TRANSACTION MULTIPLES IMPLIED PRICE PER BKNG SHARE: $32.85 PREMIUM TO RECENT MARKET PRICE: 23% PRICE / STATED 3/31/99 BOOK VALUE PER SHARE: 235% PRICE / 1999 FIRST CALL ESTIMATED EARNINGS PER SHARE: 14.6 x PRICE / 2000 FIRST CALL ESTIMATED EARNINGS PER SHARE: 13.3 x BKNG OWNERSHIP: 28.9% 8 TRANSACTION TIME TABLE EXPECTED SHAREHOLDER APPROVAL: Q3 - 1999 EXPECTED CLOSING: Q4 - 1999 EXPECTED SYSTEMS CONVERSION: Q2 - 2000 9 TRACK RECORD OF SUCCESSFUL ACQUISITIONS - EPS GROWTH Operating Earnings Per Share ORIGINALLY REPORTED EARNINGS PER SHARE 1993 1994 1995 1996 1997 1998 - ---- ---- ---- ---- ---- ---- $0.50 $0.76 $1.03 $1.11 $1.30 $1.40 COMPOUND GROWTH RATE: 22.9% 10 TRACK RECORD OF SUCCESSFUL ACQUISITIONS - IMPROVED PROFITABILITY Originally Reported Return on Equity 1993 1994 1995 1996 1997 1998 - ---- ---- ---- ---- ---- ---- 7.9% 11.2% 13.7% 15.5% 16.5% 17.1% 11 PRO FORMA BALANCE SHEET AS OF 3/31/99 PEOPLES BANKNORTH PRO FORMA HERITAGE GROUP COMBINED(1) -------- --------- ----------- (Dollars in Thousands, Except Per Share Data) Total Loans $ 7,067,467 $ 2,833,658 $ 9,901,125 Loan Loss Reserve 110,573 45,658 156,231 Intangible Assets 121,401 77,835 199,236 - ----------------- ----------- ----------- ----------- Total Assets $12,594,324 $ 4,338,522 $16,932,846 =========== =========== =========== Total Deposits $ 8,217,154 $ 3,573,011 $11,790,165 =========== =========== =========== Shareholders Equity $ 905,178 $ 324,465 $ 1,189,143 =========== =========== =========== Shares Outstanding (3/31/99) 104,100 23,205 146,448 Book Value Per Share $ 8.70 $ 13.98 $ 8.12 Tangible Book Value Per Share $ 7.53 $ 10.63 $ 6.76 (1) Includes $40.5 million in after tax merger adjustments 12 DIVERSIFIED LOAN PORTFOLIO AS OF 3/31/99 PEOPLES BANKNORTH PRO FORMA % OF HERITAGE GROUP COMBINED TOTAL -------- --------- --------- ----- (Dollars in Thousands) Residential Real Estate Mortgages $2,099,833 $1,034,053 $3,133,886 32% Commercial Real Estate Mortgages 1,647,042 810,634 2,457,676 25% Commercial Loans 1,197,341 548,498 1,745,839 18% Consumer Loans and Leases 2,123,251 440,473 2,563,724 26% - ------------------------- ---------- ---------- ---------- --- Total Loans $7,067,467 $2,833,658 $9,901,125 ========== ========== ========== AVERAGE YIELD ON LOANS 8.36% 8.60% 8.45% 13 STRONG DEPOSIT MIX AS OF 3/31/99 PEOPLES BANKNORTH PRO FORMA % OF HERITAGE GROUP COMBINED TOTAL (Dollars in Thousands) Demand Deposits $ 1,209,169 $ 471,253 $ 1,680,422 14% Regular Savings 1,300,211 346,892 1,647,103 14% Money Market & NOW Accounts 2,062,179 1,437,679 3,499,858 30% Certificates of Deposit 3,645,595 1,317,187 4,962,782 42% - ----------------------- ---------- ---------- ----------- --- Total Deposits $ 8,217,154 $ 3,573,011 $11,790,165 =========== =========== =========== Borrowed Funds $ 3,354,006 $ 362,371 $ 3,716,377 =========== =========== =========== AVERAGE COST OF INTEREST BEARING LIABILITIES 4.19% 4.07% 4.16% NET INTEREST MARGIN 3.86% 4.39% 4.03% 14 PRO FORMA COMBINED EARNINGS
2000 ESTIMATE(1) 2001 ESTIMATE(1) -------------------- ------------------- DOLLARS PER SHARE DOLLARS PER SHARE -------------------- ------------------- (Dollars in Thousands) GAAP NET INCOME - --------------- Peoples Heritage $190,225 $1.80 $212,674 $2.01 Banknorth 58,139 $2.47 63,824 $2.71 After-Tax Cost Savings(2) 13,339 28,243 -------- -------- Pro Forma Operating Earnings $261,703 $1.76 $304,741 $2.05 ======== ======== Net GAAP EPS Accretion / Dilution -2.2% 1.9% - --------------------------------------------------------------------------------------- CASH NET INCOME - --------------- Peoples Heritage $200,793 $1.90 $223,242 $2.11 Banknorth 63,331 $2.69 69,016 $2.93 After-Tax Cost Savings(2) 13,339 28,243 -------- -------- Pro Forma Operating Earnings $277,463 $1.87 $320,501 $2.16 -------- -------- Net Cash EPS Accretion / Dilution -1.8% 2.1% Pro Forma Diluted Shares 148,638 148,638
(1) First Call consensus estimates used for 2000, PHBK and BKNG grown at 11.8% and 9.8% respectively for 2001 (2) Cost savings in 2000 will be delayed because system consolidation won't be done until Q2-2000 15 SUMMARY - TRADITION OF SHAREHOLDER VALUE o Creates the premier community bank franchise in the New England region o Banknorth is a natural extension to Vermont and New York o Similar market economies o Comparable customer demographics o Compatible management styles o Quality organization with proven management team o Maintains earnings growth and superior financial performance 16 NOTE ON FORWARD LOOKING INFORMATION This presentation contains forward looking information for Peoples Heritage Financial Group, Inc. and Banknorth Group, Inc. on a stand alone basis and a pro forma combined basis. Actual results may vary materially from the forward looking statements. Factors which could result in material variations from forward looking statements include, but are not limited to: changes in interest rates which could affect net interest margins and net interest income; delays in cost savings measures or a failure to realize anticipated cost savings; competitive factors which could affect non interest income, cost of deposits, and interest income; and general economic conditions which could negatively affect the volume of loan originations, the amount of loan losses and levels of non interest income. -----END PRIVACY-ENHANCED MESSAGE-----