As TD Banknorth Inc. unveiled its second acquisition deal in New Jersey in less than a year, chief executive William J. Ryan reiterated his desire to eventually expand into New York City.
He also said he is inclined to be patient.
"We are not afraid to wait" for the right target in New York, Mr. Ryan said in an interview last week after his Portland, Maine, company unveiled its $480.6 million deal to buy Interchange Financial Services Corp., a $1.6 billion-asset company based in Saddle Brook, N.J.
Recent merger and acquisition activity in the Big Apple has diminished the number of available targets, but Mr. Ryan does not seem deterred.
"I think there are many targets out there," he said, but until the right target presents itself, he is content to acquire in the vicinity of New York, particularly in New Jersey.
"You won't hear from us in the next several months," Mr. Ryan said, but "I am really very optimistic that we will find more opportunities in 2007."
On Jan. 31 the $40.3 billion-asset TD Banknorth acquired Hudson United Bancorp. of Mahwah, N.J., which has some branches in the New York suburbs. TD Banknorth paid $1.9 billion for Hudson, which had roughly $9 billion of assets.
In March of last year what was then called Banknorth Group Inc. sold a 51% stake in itself to Toronto-Dominion Bank, which now holds a 55.8% stake. Toronto-Dominion executives are eager to get bigger in the United States.
Buying Interchange would give TD Banknorth 30 more branches, in Bergen and Essex counties, and it would become the fifth-largest banking company in Bergen County, an attractive market both for deposits and business banking.
Mr. Ryan said the opportunity to expand in Bergen County, across the Hudson River from Manhattan, was particularly important.
TD Banknorth's deposit share in Bergen County would grow to 6.3%, according to the most recent data from the Federal Deposit Insurance Corp. That market share would put it only marginally behind Commerce Bancorp Inc. of Cherry Hill, N.J., which holds a 6.6% share. Bank of America Corp. has the top share, 22.7%.
The deal is expected to close this year or early in the first quarter of next year.
Mr. Ryan conceded that Interchange, with its $1.3 billion of deposits and $1.1 billion of loans, would not come cheap. The $480.6 million deal price represents a premium of 20% over Interchange's closing stock price Thursday and 31.1% over its core deposits. The deal price is 4.42 times Interchange's tangible book value and 23.2 times the full-year earnings estimates for the company.
"These numbers are a little bit higher than we normally pay," he said, but TD Banknorth plans to cut Interchange's cost base in half by consolidating back offices and some branches. There are 12 or 13 branches of Hudson United and Interchange that are in close proximity of one another and offer consolidation opportunities, he said.
All tellers and lending officers would keep their jobs with TD Banknorth, he said.
"Certainly, Interchange was on the list of companies that we wanted to talk to some time in theforeseeable future," Mr. Ryan said. However, he said he only recently met Anthony Abbate, Interchange's president and CEO, over lunch. A deal was quickly agreed upon, and the terms were hammered out within a month, Mr. Ryan said.
Interchange has been dealing with pressure from Lawrence B. Seidman, its largest shareholder; last year he demanded that the company improve shareholder value or sell itself. Mr. Abbate and Mr. Ryan said the deal was not a reaction to the pressure.
Mr. Seidman, who owns 5% of Interchange, is one of several shareholder activists who have dogged the banking industry in recent months; the most notable voices have been heard at Sovereign Bancorp Inc. of Philadelphia and Mellon Financial Corp. of Pittsburgh. Sovereign recently settled a proxy fight with its largest shareholder, while Mellon's appointment of a new CEO appears to have quieted its critics.
Mr. Abbate said in a telephone interview Thursday that the deal "was not done specifically in response to issues" raised by Mr. Seidman. "We never settled our differences."
Interchange had not been looking to sell itself, according to Mr. Abbate. "The price that we were offered [by TD Banknorth] was extremely attractive."
When asked Friday whether his pressure pushed Interchange to sell itself, Mr. Seidman said he did not want to speculate on what sealed the TD Banknorth deal. "I think all their shareholders should be happy … I am just happy its over."
