Camden National Corp. CAC has signed an agreement to acquire Northway Financial, Inc. (“Northway”) in an all-stock transaction valued at roughly $86.6 million.
Key Details of the Acquisition by Camden National
Northway, founded in 1881, and based in North Conway, New Hampshire, operates with 17 full-service branches with a stable and high-quality deposit base. As of June 30, 2024, it had roughly $1.3 billion in total assets, $0.9 billion in total loans and $1 billion in deposits.
Upon the closure of the transaction, Northway will be merged with Camden National, with an anticipated pre-tax merger expense of $13.5 million.
The combined entity will operate under Camden National Bank with 74 branches across New Hampshire and Maine and is anticipated to have roughly $7 billion in total assets, $5.5 billion in deposits, $5.1 billion in loans and $2 billion in assets under administration. Per the agreement, CAC will pay 0.83 shares of its stock for each share of Northway’s common stock.
Upon the completion of the deal, Camden National’s shareholders will own roughly 86% of the combined entity, while Northway’s shareholders will own roughly 14%.
Also, upon the closure of the deal, one Northway director will join the board of Camden National and its subsidiary, Camden National Bank. The agreement has been unanimously approved by the board of directors of both entities and is expected to be closed by the first quarter of 2025, subject to customary closing conditions, and Northway shareholders’ approval.
What Makes This Deal Financially Compelling for CAC?
CAC will likely benefit from expected cost savings of 35% of Northway’s non-interest expense, 75% of which will be phased in 2025, and the rest will be realized thereafter. The entire restructuring costs will be realized upon the completion of the transaction.
The deal is anticipated to be 19.9% and 32.7% accretive to 2025 and 2026 earnings per share, respectively, assuming the phased-in cost savings. Also, tangible book value is expected to dilute by 16.2%, with a projected earn-back period of approximately 3.3 years.
Further, CAC projects a roughly 24% internal rate of return. Also, following the merger, the company’s capital ratios are anticipated to be significantly “well-capitalized” above the regulatory requirements.
This transaction is likely to strengthen the deposit franchise through low-cost deposits. Also, it will expand the company’s footprint in attractive markets alongside improving the profitability profile with a return on average assets of more than 1%.
Simon Griffiths, president and CEO of Camden National, stated, “The merger will build upon our existing presence in New Hampshire and provide the opportunity to leverage our significant technology investments and advice capabilities across an expanded customer base. Together, we will be able to unlock meaningful growth opportunities and create additional capacity for further strategic technology investments to deliver an enhanced offering for customers.”
CAC’s Zacks Rank & Price Performance
Year to date, shares of Camden National have risen 0.8% against the industry’s decline of 1.5%.
Image Source: Zacks Investment Research
Currently, CAC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Similar Steps by Other Banks
Last week, ConnectOne Bancorp, Inc. CNOB agreed to acquire The First of Long Island Corp. (FLIC). The all-stock transaction is valued at $284 million.
CNOB will likely benefit from expected cost savings of 35% of FLIC’s non-interest expense, 50% of which will be phased in 2025, and the rest will be realized thereafter.
The deal is anticipated to be 36% accretive to CNOB’s 2025 earnings per share, assuming the execution of cost savings. Also, tangible book value is expected to dilute by 12% with a projected earn-back period of approximately 2.9 years.
Similarly, The Bank of New York Mellon Corporation BK agreed to acquire Archer Holdco, LLC, a leading technology-enabled service provider of managed account solutions to the asset and wealth management industry.
With this acquisition, BK should be able to enhance its enterprise platform to support retail managed accounts. Along with augmenting the company’s existing asset servicing capabilities for managed accounts, Archer will provide BNY Investments and BNY Pershing’s Wove wealth platform for advisors with the expanded distribution of model portfolios and access to its multi-custodial network.
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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.
