NAL Newalliance Bancshares

According to a regulatory filing on Wednesday, the merger of New Alliance Bancshares Inc. (NAL) and First Niagara Financial Group Inc. (FNFG) is slated to close by April 15. Following the merger, all the NAL branches would re-open under the name of FNFG from April 18.

In August 2010, NAL had announced that it would be acquired by FNFG. The stock and cash deal was valued at $1.5 billion, making it the largest unassisted deal in the U.S. Banking sector since the financial crisis in mid 2008.

On December 20, 2010, the shareholders of NAL and FNFG consented to the imminent acquisition. Then, on March 31, the Federal Reserve Board too gave its approval. Finally, on Wednesday the Comptroller of the Currency (OCC) and the Connecticut Department of Banking also gave their green signal to the impending merger of the two companies.

Concurrently, the preliminary results of elections made by NAL shareholders as to the form of the merger consideration to be received were also announced. Of the nearly 105,144,295 NAL shares outstanding as of April 5, about 80.92% voted to receive FNFG common stock, 8.00% elected to receive cash and approximately 11.08% maintained that they had no particular preference as to the form of merger consideration or did not vote validly.

As per the merger agreement, the shareholders of NAL will get cash or stock at a ratio of 1.1 shares of FNFG for each NAL share. Investors can also opt for a combination of stock and cash. Based on the closing price of FNFG shares on August 19, 2010, the deal valued NAL at $14.09 per share, up 24% from the closing price of NAL shares on the same day.

After completion of the merger, the combined entity would become one of the top 25 banks of the nation, with over $30 billion in assets and $18 billion in deposits. The deal would add 88 NAL branches to FNFG's network of 257 branches. It would help FNFG expand its footprint in Connecticut and Massachusetts, where NAL has a significant presence.

However, in December 2010, FNFG had announced that it would curtail about 4% of NAL’s workforce. As a result, about 219 back office positions would be affected, while nearly 180 new jobs would be created in the New England region.

Although NAL is expected to benefit from its strong capital position and growth in core deposits, we believe that increasing credit costs and significant exposure to residential and commercial real estate loans will keep earnings under pressure. However, some of these concerns will end after its acquisition by FNFG.

Currently, both NAL and FNFG retain a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

 
FIRST NIAGARA (FNFG): Free Stock Analysis Report
 
NEWALLIANCE BCS (NAL): Free Stock Analysis Report
 
Zacks Investment Research