Strategic Repositioning Strengthens Market
Position as Greater Boston’s Leading Community Bank
Eastern Bankshares, Inc. (“Eastern” or the “Company”) (NASDAQ
Global Select Market: EBC), the stock holding company for Eastern
Bank, announced that its wholly owned subsidiary Eastern Insurance
Group, LLC (“Eastern Insurance”) today entered into a definitive
agreement to sell its insurance operations to Arthur J. Gallagher
& Co. (NYSE: AJG) (“Gallagher”) for approximately $510 million
(“the insurance transaction”). Also today, Eastern and Cambridge
Bancorp (NASDAQ: CATC) (“Cambridge”), the parent company of
Cambridge Trust Company, announced they have entered into a
definitive merger agreement pursuant to which Cambridge will merge
with and into Eastern in an all-stock transaction valued at
approximately $528 million (“the merger”).
Key Highlights:
- Merger will create a $27 billion combined franchise and
further solidify Eastern as the largest Boston-based community bank
by deposits1
- Sale of Eastern Insurance, the third largest bank-affiliated
insurance brokerage in the country, will allow Eastern to benefit
from valuation premium and redeploy capital for in-market strategic
growth opportunity
- Combined transactions are financially compelling with
estimated 20% earnings per share accretion, 7.5% tangible book
value per share* dilution and a 2.75 year earnback
- Merger will create the largest bank-owned Independent
Investment Advisor in Massachusetts and the tenth largest overall
in Massachusetts2
- Eastern plans to welcome Denis Sheahan, Cambridge CEO, to
its executive team as CEO
Investor call at 9:00 a.m. ET September 20, 2023
Eastern and Cambridge Merger
Under the terms of the merger agreement, which has been
unanimously approved by both boards of directors, each share of
Cambridge common stock will be exchanged for 4.956 shares of
Eastern common stock. Eastern anticipates issuing approximately
39.4 million shares of its common stock in the merger. Based upon
Eastern’s $13.41 per share closing price on September 18, 2023, the
transaction is valued at approximately $528 million and the
aggregate consideration represents 114% of Cambridge’s tangible
book value* and a 24% premium to Cambridge’s thirty-day volume
weighted average price.
Upon closing, Denis Sheahan, Chairman, President and CEO of
Cambridge, will become the CEO of Eastern and will join Eastern’s
Board of Directors. Eastern’s President Quincy Miller will be
promoted to Vice Chair, President, and Chief Operating Officer.
Both Mr. Sheahan and Mr. Miller will report directly to Bob Rivers,
who will serve as Executive Chair and Chair of the Board of
Directors. In addition to Mr. Sheahan, three Cambridge directors
are expected to be elected to Eastern’s Board of Directors in
connection with the closing.
Given the distinction of the Cambridge Trust brand in the banks’
shared local markets, the combined wealth management and private
banking divisions will operate under the Cambridge Trust brand and
leadership.
As of June 30, 2023, Cambridge had approximately $5.5 billion of
total assets, $4.0 billion of total loans, $4.4 billion of deposits
and $4.4 billion of client assets under management and
administration (“AUMA”). Upon completion of the merger, the
combined company is expected to have approximately $27.1 billion in
total assets, $18.0 billion of total loans, $22.6 billion of
deposits and $7.6 billion of AUMA.
“I’ve long admired the success of Cambridge Trust under Denis’s
leadership, and I’m excited to welcome Denis and the Cambridge team
to Eastern,” said Bob Rivers, Chief Executive Officer and Chair of
the Board of Eastern Bankshares, Inc. and Eastern Bank. “As we set
our sights on the future, the enhanced capabilities and financial
strength created by this merger will allow us to further position
Eastern as the region’s local financial partner of choice,
delivering enhanced value for our customers and shareholders,
greater support for our communities, and increased opportunities
for our colleagues.”
Sheahan commented, “I am delighted to be a part of bringing
together two terrific companies who share common values and vision.
I know the Cambridge Trust team will rise to the opportunity ahead
and I look forward to working with our colleagues at Eastern as we
integrate and deliver exceptional service to our clients.”
The merger is expected to be completed during the first quarter
of 2024, subject to certain conditions, including the receipt of
required regulatory approvals and approval by Eastern and Cambridge
shareholders. All Cambridge directors and executive officers and
their affiliates with voting power have agreed to vote in favor of
the merger.
Sale of Eastern Insurance Group, LLC
Also today, Eastern announced that Eastern Insurance has entered
into a definitive agreement to sell its insurance operations to
Arthur J. Gallagher & Co., for approximately $510 million in
cash consideration. On an after-tax basis, the net gain on sale is
expected to be approximately $260 million.
“For more than 20 years, the dedicated team at Eastern Insurance
has grown the agency into what is now the third largest
bank-affiliated insurance brokerage in the country and a top 50
agency overall,” said Rivers. “The growth and success of Eastern
Insurance was made possible by the leadership of CEO Tim Lodge and
the dedicated team who have built the agency into one of the
premier insurance brokerage firms in the country. For that and
more, I am grateful to each and every one of my colleagues at
Eastern Insurance. On behalf of all of their colleagues at Eastern,
they will be greatly missed.”
After careful consideration of Eastern’s long-term goals, the
transaction is being made to recognize the valuation premium of
Eastern Insurance, while allowing Eastern to focus on the growth
and strategic initiatives of its core banking business, including
the announced merger with Cambridge.
Rivers commented, “Gallagher is a proven insurance leader, and I
have full confidence that they will continue the strong level of
service our insurance customers have come to expect. We look
forward to continuing our relationship with Gallagher as our
insurance brokerage partner.”
Eastern anticipates that the insurance transaction, which is
subject to standard closing conditions, will close in the fourth
quarter of 2023. In connection with the sale, current leadership
and employees of Eastern Insurance are expected to join
Gallagher.
Eastern Insurance acts as an agent in offering property and
casualty as well as life and health insurance to both personal and
commercial customers and operates through 22 non-branch offices
located primarily in eastern Massachusetts. Eastern Bank acquired
Allied American Insurance Agency, Inc. in 2002, creating Eastern
Insurance Group, LLC, and has since acquired 36 insurance agencies,
growing revenue from approximately $28.2 million in 2003 to $99.2
million in 2022.
Financially Compelling Transactions
On a combined basis, the merger and the insurance transaction
are expected to be approximately 20% accretive to Eastern’s 2024
earnings per share and approximately 7.5% dilutive to tangible book
value per share* with an expected earnback period of approximately
2.75 years and an internal rate of return of approximately 20%.
On a pro forma basis for December 31, 2023, Eastern expects to
maintain robust capital levels with a forecasted common equity tier
1 ratio of approximately 14.5%.
A presentation with additional information can be accessed by
visiting Eastern’s investor relations website at
investor.easternbank.com.
Advisors
Regarding the Eastern and Cambridge merger, J.P. Morgan
Securities LLC served as financial advisor and Nutter McClennan
& Fish LLP provided legal counsel to Eastern. BofA Securities,
Inc. served as financial advisor and Hogan Lovells US LLP provided
legal counsel to Cambridge.
Regarding the Eastern Insurance transaction, Piper Sandler &
Co. served as financial advisor and Nutter McClennen & Fish LLP
provided legal counsel to Eastern.
Conference Call
Bob Rivers, Denis Sheahan, and Jim Fitzgerald, Eastern’s Chief
Administrative Officer, Chief Financial Officer and Treasurer, will
hold a conference call for investors on September 20, 2023 at 9:00
a.m. Eastern Time. The conference call will be simultaneously
webcast. Participants may join the webcast on the Company’s
Investor Relations website at investor.easternbank.com. A replay of
the webcast will be made available on demand on this site.
To join by telephone, participants can call the toll-free
dial-in number (888) 259-6580 and reference conference ID 02238000.
Please dial five to ten minutes prior to the start time to allow
time for registration. In order to bypass speaking to the operator
on the day of the call (recommended), please pre-register at:
https://emportal.ink/3Zrrp19. Pre-registration will be active 1
hour prior to the start time.
About Eastern Bankshares, Inc. and Eastern Bank
Eastern Bankshares, Inc. is the stock holding company for
Eastern Bank. Founded in 1818, Boston-based Eastern Bank has more
than 120 locations serving communities in eastern Massachusetts,
southern and coastal New Hampshire, and Rhode Island. As of June
30, 2023, Eastern Bank had approximately $22 billion in total
assets. Eastern provides banking, investment and insurance products
and services for consumers and businesses of all sizes, including
through its Eastern Wealth Management division and its Eastern
Insurance Group LLC subsidiary. Eastern takes pride in its
outspoken advocacy and community support that includes $240 million
in charitable giving since 1994. An inclusive company, Eastern
employs approximately 2,100 deeply committed professionals who
value relationships with their customers, colleagues, and
communities. For investor information, visit
investor.easternbank.com.
About Cambridge Bancorp
Cambridge Bancorp, the parent company of Cambridge Trust
Company, is based in Cambridge, Massachusetts. Cambridge Trust
Company is a 133-year-old Massachusetts chartered commercial bank
with approximately $5.49 billion in assets at June 30, 2023, and a
total of 22 Massachusetts and New Hampshire branch locations.
Cambridge Trust Company is one of New England's leaders in private
banking and wealth management with $4.4 billion in client assets
under management and administration at June 30, 2023. The Wealth
Management group maintains offices in Boston and Wellesley,
Massachusetts and Concord, Manchester, and Portsmouth, New
Hampshire.
About Eastern Insurance Group LLC
Eastern Insurance Group LLC, headquartered in Natick,
Massachusetts, is a wholly-owned subsidiary of Eastern Bank.
Licensed to do business in every state, Eastern Insurance serves
more than 75,000 individuals and businesses and provides a full
range of personal and commercial insurance products, as well as
employee benefits services. Representing more than 50 national and
regional insurance carriers, Eastern Insurance is recognized as one
of the largest insurance agencies headquartered in Massachusetts.
For more information, visit www.easterninsurance.com.
About Arthur J. Gallagher & Co.
Arthur J. Gallagher & Co. (NYSE:AJG), a global insurance
brokerage, risk management and consulting services firm, is
headquartered in Rolling Meadows, Illinois. Gallagher provides
these services in approximately 130 countries around the world
through its owned operations and a network of correspondent brokers
and consultants.
Non-GAAP Financial Measures
*Denotes a non-GAAP financial measure used in this press
release.
This press release contains both financial measures based on
accounting principles generally accepted in the United States
(“GAAP”) and non-GAAP based financial measures. Management believes
that providing certain non-GAAP financial measures provides
investors with information useful to their understanding financial
performance, performance trends and financial position. Management
utilizes these measures for internal planning and forecasting
purposes, and management, as well as securities analysts,
investors, and other interested parties, also use these measures to
compare peer company operating performance. These non-GAAP measures
should not be considered a substitute for GAAP basis measures and
results. Because non-GAAP financial measures are not standardized,
it may not be possible to compare these financial measures with
other companies’ non-GAAP financial measures having the same or
similar names. A reconciliation of tangible book value for
Cambridge is included in a table at the end of the press
release.
This press release also includes certain forward-looking modeled
projections and estimates, including estimates of the combined
proforma company’s tangible book value per share. These metrics are
dependent on variable factors, including management’s assumptions
and modeling inputs as well as market driven factors such as
interest rates, over which the Company cannot exercise control.
Accordingly, reconciliations of the Company’s outlook on these
items cannot be readily determined in a format useful for investors
and could not be made readily available.
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of section 27A of the Securities Act of 1933, as
amended, and section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements include statements regarding
anticipated future events and can be identified by the fact that
they do not relate strictly to historical or current facts. You can
identify these statements from the use of the words “may,” “will,”
“should,” “could,” “would,” “plan,” “potential,” “estimate,”
“project,” “believe,” “intend,” “anticipate,” “expect,” “target”
and similar expressions. Forward-looking statements, by their
nature, are subject to risks and uncertainties. There are many
factors that could cause actual results to differ materially from
expected results described in the forward-looking statements.
Factors relating to the proposed transactions that could cause
or contribute to actual results differing materially from expected
results include, but are not limited to, the possibility that
revenue or expense synergies or the other expected benefits of one
or both transactions may not materialize in the timeframe expected
or at all, or may be more costly to achieve; that one or both
transactions may not be timely completed, if at all; that prior to
the completion of the transactions or thereafter, Eastern or
Cambridge may not perform as expected due to transaction-related
uncertainty or other factors; that Eastern is unable to
successfully implement its integration or disposition strategies;
that required regulatory, shareholder or other approvals are not
obtained or other closing conditions are not satisfied in a timely
manner or at all for one or both transactions; that the timing of
completion of the proposed mergers are each dependent on various
factors that cannot be predicted with precision at this point;
reputational risks and the reaction of the companies’ customers to
one or both transactions; the inability to implement onboarding or
transition plans and other consequences associated with the
mergers; continued pressures and uncertainties within the banking
industry and Eastern and Cambridge’s markets, including changes in
interest rates and deposit amounts and composition, adverse
developments in the level and direction of loan delinquencies,
charge-offs, and estimates of the adequacy of the allowance for
loan losses, increased competitive pressures, asset and credit
quality deterioration, and legislative, regulatory, and fiscal
policy changes and related compliance costs; and diversion of
management time on transaction-related issues.
These forward-looking statements are also subject to the risks
and uncertainties applicable to our respective businesses generally
that are disclosed in Eastern’s and Cambridge’s 2022 Annual Reports
on Form 10-K. Eastern’s and Cambridge’s SEC filings are accessible
on the SEC's website at www.sec.gov and on their respective
corporate websites at investor.easternbank.com and
ir.cambridgetrust.com. These web addresses are included as inactive
textual references only. Information on these websites is not part
of this document. For any forward-looking statements made in this
press release, Eastern and Cambridge claim the protection of the
safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. Except as required by
law, each company specifically disclaims any obligation to update
any forward-looking statements as a result of developments
occurring after the date of this press release.
Additional Information and Where to Find It
In connection with the proposed merger transaction, the Company
intends to file with the SEC a Registration Statement on Form S-4
that will include a Joint Proxy Statement of the Company and
Cambridge and a Prospectus of the Company (the “joint proxy
statement/prospectus”), as well as other relevant documents
concerning the proposed transaction. This communication does not
constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote or approval, nor shall
there be any sale of securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such
jurisdiction. INVESTORS AND SHAREHOLDERS OF THE COMPANY AND
CAMBRIDGE ARE URGED TO READ THE REGISTRATION STATEMENT AND THE
JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE TRANSACTION WHEN IT
BECOMES AVAILABLE AND EACH OTHER RELEVANT DOCUMENT FILED WITH THE
SEC, AS WELL AS ANY AMENDMENT OR SUPPLEMENT TO THOSE DOCUMENTS,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. A copy of the
definitive joint proxy statement/prospectus, as well as other
filings containing information about the Company and Cambridge, can
be obtained without charge, at the SEC’s website
(http://www.sec.gov). Copies of the joint proxy
statement/prospectus and the filings with the SEC that will be
incorporated by reference in the joint proxy statement/prospectus
can also be obtained, without charge, by directing a request to the
Company’s Investor Relations team via email at
InvestorRelations@easternbank.com or by telephone at (781)
598-7920, or to Cambridge Investor Relations via email at
Joseph.Sapienza@cambridgetrust.com or by telephone at (617)
520-5520.
Participants in the Solicitation
The Company, Cambridge, and their respective directors,
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies
from the shareholders of the Company and/or Cambridge in connection
with the proposed transaction under the rules of the SEC.
Information regarding the Company’s directors and executive
officers is available in its definitive proxy statement relating to
its 2023 Annual Meeting of Shareholders, which was filed with the
SEC on April 3, 2023, and its Annual Report on Form 10-K for the
year ended December 31, 2022, which was filed with the Commission
on February 24, 2023, and other documents filed by the Company with
the SEC. Information regarding Cambridge’s directors and executive
officers is available in its definitive proxy statement relating to
its 2023 Annual Meeting of Shareholders, which was filed with the
SEC on March 16, 2023, and other documents filed by Cambridge with
the SEC. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be included in
the joint proxy statement/prospectus and other relevant materials
filed with the SEC, which may be obtained free of charge as
described in the preceding paragraph.
Reconciliation of Non-GAAP Financial
Measure:
Cambridge Bancorp and Subsidiaries
(unaudited, dollars in thousands)
As of:
Tangible book value:
June 30, 2023
Total shareholders’ equity (GAAP):
$527,004
Less: Goodwill & other intangibles
(71,535)
Tangible book value (non-GAAP)
$455,469
________________________________ 1 Source: S&P Global Market
Intelligence; FDIC Summary of Deposit Survey (2022). Excludes trust
banks. 2 Boston Business Journal
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version on businesswire.com: https://www.businesswire.com/news/home/20230919096596/en/
Eastern Bankshares, Inc. and Eastern Bank: Investor
contact: Jill Belliveau Eastern Bankshares, Inc.
InvestorRelations@easternbank.com 781-598-7920 Media contact:
Andrea Goodman Eastern Bank a.goodman@easternbank.com 781-598-7847
Cambridge Bancorp Investor contact: Joseph P. Sapienza
Joseph.Sapienza@cambridgetrust.com 617-520-5520 Media contact:
Danielle Remis Hackel Danielle.remis@cambridgetrust.com
617-441-1421 Arthur J. Gallagher & Co. Investor contact:
Ray Iardella ray_iardella@ajg.com 630-285-3661 Media contact: Paul
Day paul_day1@ajg.com 630-285-5946
Arthur J Gallagher (NYSE:AJG)
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