EBC - Eastern Bankshares Is Buying Century Bancorp. Is it a Good Move?
Boston-based Eastern Bankshares (NASDAQ: EBC) , which went public in October, surprised many with its recent announcement that it plans to purchase neighboring Century Bancorp (NASDAQ: CNBKA) . While many expected Eastern to make a big deal, given that it was sitting on a war chest of $1.8 billion following its IPO, I was surprised to see it take out Century, which is Massachusetts' largest family-run bank and an institution that didn't look particularly amenable to buyout offers.
The deal not only shakes up the banking scene in Boston, it also achieves a big goal that Eastern has had since it first announced plans to go public. But does it really make sense for Eastern, and does it make the company a better investment?
Eastern will purchase Century for $642 million in cash, the equivalent of $115.28 per share. The deal values Century at 175% of its tangible book value (equity minus goodwill and other intangible assets), making it one of the larger deals in the Massachusetts banking scene in recent years. Eastern also announced it would raise its quarterly dividend by 33% in tandem with the acquisition.
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Eastern Bankshares Is Buying Century Bancorp. Is it a Good Move?