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Sovereign and Seacoast Approve Amended Terms of Agreement; Deal
Becomes More Accretive to Earnings and is Equivalent to a $275 Million Stock
Buyback
BOSTON, April 12 /PRNewswire-FirstCall/ -- Sovereign Bancorp, Inc.
("Sovereign")today announced that it has elected to amend its merger agreement
with Seacoast Financial Services Corporation ("Seacoast") to provide for a cash
election as a percentage of the overall consideration. Sovereign previously
announced its acquisition of Seacoast, a pro forma $5.3 billion financial
institution headquartered in New Bedford, Massachusetts, on January 26, 2004 in
a stock-for-stock exchange valued at approximately $1.1 billion, or
approximately $35.00 per Seacoast share outstanding.
In summary, the amended merger agreement gives Seacoast shareholders the
flexibility to elect to receive shares of Sovereign Common Stock or cash subject
to the limitation that 75% of all the outstanding shares of Seacoast common
stock are exchanged for Sovereign common stock and 25% of the outstanding shares
of Seacoast common stock are exchanged for cash. It also provides that each
shareholder of Seacoast may receive the same dollar value of consideration for
each share of Seacoast common stock, whether such shareholder elects to receive
cash or stock.
The amendment also contains the mechanics for effecting the cash/stock election
and the equalization of the merger consideration between Seacoast shareholders
who elect to receive cash and those who elect to receive stock.
All other material terms and conditions of the initial merger agreement remain
essentially unchanged. The amendment to the merger agreement is expected to be
filed with the SEC on Form 8-K no later than Tuesday, April 13, 2004.
Commenting on the merger agreement amendment, Jay S. Sidhu, Sovereign's Chairman
and Chief Executive Officer, noted, "We are pleased to be able to offer this
flexibility to Seacoast shareholders. As we have discussed recently,
Sovereign's internal generation of capital has become so strong that we are
forecasting over $750 million of tangible capital growth in 2005. We also
recently raised $800 million through a convertible trust preferred issuance.
All of this capital is not needed to meet our 2005 capital targets, and we have
been looking at various ways to maximize our use of this excess capital that
will benefit all of our current and prospective shareholders. We believe our
stock is meaningfully undervalued at this time and that we should take advantage
of the buy back opportunity implicit in providing fewer shares of Sovereign
common stock and more cash to Seacoast shareholders. This also gives us the
ability to give Seacoast shareholders a choice to elect to receive cash or
stock. Sovereign is currently trading at a P/E of only 10.5 times the median of
our 2005 cash earnings estimate of $1.95 - $2.05."
Noted Kevin G. Champagne, Seacoast President and Chief Executive Officer, "We
are pleased with the additional flexibility and value that Sovereign is
providing our shareholders with this change and believe that it represents a
clear win-win situation for the shareholders of our two companies. We look
forward to becoming part of Sovereign in the third quarter, and we continue to
work with Sovereign's team members every day in order to assure a seamless
transition for our customers, employees, and communities we serve."
"Sovereign remains committed to striving to achieve approximately $1.65 - $1.70
in operating earnings and $1.75 - $1.80 in cash earnings during 2004, which
excludes the impact of merger-related charges for our recently completed and
pending acquisitions. Sovereign also remains committed that this merger
amendment does not change any of Sovereign's 2004 or 2005capital goals or
earnings goals, or our ability to achieve these goals. If anything, this should
make our Seacoast acquisition more accretive to earnings than the previously
contemplated all-stock structure," stated Sidhu.
Sovereign Bancorp, Inc., ("Sovereign") (NYSE:SOV), which has its New England
headquarters in Boston, Massachusetts, is the parent company of Sovereign Bank,
which is, pro forma pending acquisitions, a $55 billion financial institution
with 650+ community banking offices, over 1,200 ATMs and about 8,300 team
members in Connecticut, Massachusetts, New Hampshire, New Jersey, New York,
Pennsylvania, and Rhode Island. In addition to full-service retail banking,
Sovereign offers a broad array of financial services and products including
business and corporate banking, cash management, capital markets, trust and
wealth management, and insurance. Sovereign is, pro forma for pending
acquisitions, one of the top 20 largest banking institutions in the United
States. For more information on Sovereign Bank, visit
http://www.sovereignbank.com/ or call 1-877-SOV-BANK.
Note:
This press release contains financial information determined by methods other
than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP").
Sovereign's management uses the non-GAAP measures of Operating Earnings and Cash
Earnings, and the related per share amounts, in their analysis of the company's
performance. These measures, as used by Sovereign, adjust net income determined
in accordance with GAAP to exclude the effects of special items, including
significant gains or losses that are unusual in nature or are associated with
acquiring and integrating businesses, and certain non-cash charges. Operating
earnings represent net income adjusted for the after-tax effects of
merger-related and integration charges and the loss on early extinguishment of
debt. Cash earnings are operating earnings excluding the after-tax effect of
amortization of intangible assets and stock- based compensationexpense
associated with stock options, restricted stock, bonus deferral plans and ESOP
awards. Since certain of these items and their impact on Sovereign's
performance are difficult to predict, management believes presentations of
financial measures excluding the impact of these items provide useful
supplemental information in evaluating the operating results of Sovereign's core
businesses. These disclosures should not be viewed as a substitute for net
income determined in accordance with GAAP, norare they necessarily comparable
to non-GAAP performance measures that may be presented by other companies.
This press release contains statements of Sovereign's strategies, plans, and
objectives, as well as estimates of future operating results for 2004 and beyond
for Sovereign Bancorp, Inc. as well as estimates of financial condition,
operating efficiencies and revenue generation. These statements and estimates
constitute forward-looking statements (within the meaning of the Private
Securities Litigation Reform Act of 1995), which involve significant risks and
uncertainties. Actual results may differ materially from the results discussed
in these forward-looking statements. Factors that might cause such a difference
include, but are not limited to, general economic conditions, changes in
interest rates, deposit flows, loan demand, real estate values and competition;
changes in accounting principles, policies, or guidelines; changes in
legislation or regulation; Sovereign's ability in connection with any
acquisition to complete such acquisition and to successfully integrate assets,
liabilities, customers, systems and management personnel Sovereign acquires into
its operations and to realize expected cost savings and revenue enhancements
within expected time frame; the possibility that expected one-time
merger-related charges are materially greater than forecasted or that final
purchase price allocations based on the fair value of acquired assets and
liabilities and related adjustments to yield and/or amortization of the acquired
assets and liabilities at any acquisition date are materially different from
those forecasted; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, integrations, pricing, products and services.
DATASOURCE: Sovereign Bancorp, Inc.
CONTACT: FINANCIAL: Jim Hogan, +1-610-320-8496, or
, or Mark McCollom, +1-610-208-6426, or
, or Stacey Weikel, +1-610-208-6112, or
; or MEDIA: Ed Shultz, +1-610-378-6159, or
, all of Sovereign Bancorp
Web site: http://www.sovereignbank.com/