WSFS - The WSFS-Bryn Mawr Merger Is Expensive but It Will Pay Off
Recently, WSFS Financial (NASDAQ: WSFS) announced that it intends to acquire Bryn Mawr Bank (NASDAQ: BMTC) in an all-stock deal valued at close to $1 billion. The tie-up between these two high performers will create a nearly $20 billion regional bank in the Philadelphia-Wilmington-Camden metropolitan statistical area (MSA) with a sizable wealth management business. While the deal looks pricey up front, I think it will work out great over the long term.
WSFS, which is based in Wilmington, Delaware, is paying $48.55 per share for Pennsylvania-based Bryn Mawr, a price that values it at 229% of its tangible book value (equity minus intangible assets and goodwill).
That's a high multiple to pay in an all-stock deal, especially when WSFS is trading at a lower multiple. (All-stock deals are more attractive when the buyer trades at a higher multiple than the seller.) As a result, WSFS will see its tangible book value diluted by more than 6%, an amount the bank expects to take 3.2 years to earn back. These days, investors typically don't like to see an earn-back period that long, and a number of analysts in recent days have downgraded WSFS.
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The WSFS-Bryn Mawr Merger Is Expensive, but It Will Pay Off