Fleet buys Summit for $7 billion

The Star-Ledger, October 2nd, 2000

The Star-Ledger Archive COPYRIGHT © The Star-Ledger 2000

Date: 2000/10/02 Monday Page: 001 Section: NEWS Edition: FINAL Size: 948 words

Fleet buys Summit for $7 billion

Deal catapults Boston firm to top of New Jersey's banking industry By SAM ALI STAR-LEDGER STAFF

Summit Bancorp.'s reign as New Jersey's largest bank is over.

Boston-based FleetBoston Financial Group will buy Princeton-based Summit, the state's last big homegrown bank, for $7 billion.

The deal, which was formally announced last night, will pay Summit shareholders about $39.78 per share. FleetBoston's offer represents a 15.7 percent premium over Summit's closing stock price of $34.38 a share on Friday.

''That's the price everyone had assumed," said Lawrence Cohn, a bank analyst at Livingston-based Ryan Beck Southeast Research. "It will be a tough deal for Fleet in the short run, but longer term, they will be able to dramatically reduce expenses (and) there will be a fair amount of job loss."

The deal will give FleetBoston, already a dominant force in New England, an equally strong presence in New Jersey - the third-wealthiest state in the country - and access to Summit's enviable cache of wealthy depositors. In Summit, FleetBoston will acquire 500 branches in Connecticut, New Jersey and eastern Pennsylvania, and a network of 600 automatic teller machines.

Add it all up and FleetBoston moves up from No. 4 in New Jersey to the top spot, significantly ahead of First Union. FleetBoston is currently the eighth-largest bank in the nation.

The Summit-FleetBoston combination will have 21 percent of the state's market share, with 537 branches. The new FleetBoston/Summit will have $220 billion assets and 1,700 branches spanning nine states, from Maine to eastern Pennsylvania.

''This transaction is an excellent geographic fit, making FleetBoston the No. 1 bank in New Jersey and for the first time extending our banking franchise into the Philadelphia region," said Terrence Murray, FleetBoston's chairman and chief executive.

The deal is expected to close on March 31, 2001.

News of the deal also ends a week's worth of speculation that had Summit employees wringing their hands and long-suffering investors salivating at the prospect of cashing in on their languishing shares.

Boosted by a five-day run-up on takeover speculation, Summit's stock had climbed nearly 23 percent, from around $28 a share to $34.38 Friday.

After the week of speculation and discussions, the future of Summit all came down to negotiations this weekend.

At around 5:15 p.m. yesterday, a steady stream of cars and limousines began filtering into Summit's Princeton headquarters off Route 1, carrying the bank's board of directors.

One by one, they entered the four-story black office complex that Summit has called home since 1985, eventually to approve the deal. A black stretch limousine carried 68-year-old board member Arthur Kania from Philadelphia.

A Summit employee who did not want to be identified, bluntly said: "They're definitely not here for a sock hop. This isn't a Princeton mixer."

Meanwhile FleetBoston's board of directors was also meeting. By 9:15 p.m., the boards had reached an agreement that drastically reshapes the banking picture in New Jersey.

New Jersey Citizen Action, the state's largest consumer watchdog group, immediately raised concerns about a FleetBoston/Summit marriage.

''Branches are going to be closed and there will be job loss," said Phyllis Salowe-Kaye, executive director of Citizen Action. "Since Fleet came into New Jersey, we have been relegated as stepchild and I don't know where we are going to come up on their grid if this deal goes through."

It was not clear last night how many people could lose their jobs. FleetBoston, with $180 billion in assets, currently employs 59,200 people.

Summit, with $39 billion in assets, employs 8,763 people.

''This acquisition is the right one for Summit," said T. Joseph Semrod, Summit's chief executive. "It provides significant value to our shareholders, our customers, our employees and the members of our community."

Semrod, 63, will stay on at the newly formed bank for at least two and a half years as chairman of FleetBoston's New Jersey operation and as a vice-chairman and board member. John Collins, Summit's vice chairman, will also stay with the new FleetBoston and serve as the bank's New Jersey president.

Last night, Semrod called Citizen Action's Salowe-Kaye to let her know Summit had been sold.

''He wanted to let me know before it came out," Salowe-Kaye said. "He said he would be available personally to deal with us if we ran into any problems."

One problem, Salowe-Kaye said, could be FleetBoston's brief history in the state. Salowe-Kaye said FleetBoston has let an entire year lapse without signing a new Community Reinvestment Act or CRA agreement - a financial commitment promising to lend money to low- and moderate-income communities. She also said her group was standing ready to file a challenge with regulators to block the acquisition of Summit if they don't come to the table.

Summit has been a leader in low-income lending in the state, she said.

Fleet first ventured into New Jersey back in 1995 with its $3.26 billion purchase of Jersey City-based NatWest Bank.

Summit can trace its history to 1861, when it was Cumberland National Bank in Bridgeton. The current Summit is actually the product of two other big mergers, the 1998 marriage of UJB Financial and Summit Bancorp. UJB adopted the Summit name.

''I think it's a good fit for the two companies," said David Ritter, a bank analyst at Argus Research. "It gives FleetBoston the affluent customer base that Summit has and it lets them vault to the top of the New Jersey market."

GRAPHIC CAPTION: 1. INFO GRAPHIC: Bank Merger 2. The state of banking A before-and-after snapshot of the state's banking industry: Before the deal: 1. Summit Bank (368 branches, $20.8 billion in deposits) 2. First Union Corp. (485 branches, $17.3 billion) 3. PNC Bank (351 branches, $11.4 billion) 4. Fleet Bank (169 branches, $8.8 billion) 5. Hudson City Savings Bank (76 branches, $7.2 billion) After the deal: 1. FleetBoston/Summit (537 branches, $30 billion in deposits) 2. First Union Corp. (485 branches, $17. 3 billion) 3. PNC Bank (351 branches, $11.4 billion) 4. Hudson City Savings Bank (76 branches, $7.2 billion) 5. Sovereign Bank, (147 branches, $6.8 billion) CREDIT: SOURCE: SNL Securities, June 1999

TAG: 2000-39d8a6790

URL: Fleet buys Summit for $7 billion