UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 28, 2016 (September 27, 2016)
SUFFOLK BANCORP
(Exact
name of registrant as specified in its charter)
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New York
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001-37658
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11-2708279
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(State or other jurisdiction of
incorporation or organization)
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(Commission
File Number)
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(I.R.S. Employer
Identification No.)
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4 West Second Street, Riverhead, New York 11901
(Address of principal executive offices) (Zip Code)
(631) 208-2400
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Memorandum of Understanding
As previously announced, on June 26, 2016, Peoples United Financial, Inc., a Delaware corporation (
Peoples
United
), entered into an Agreement and Plan of Merger (the
Merger Agreement
) with Suffolk Bancorp, a New York corporation (
Suffolk
). The Merger Agreement provides that, upon the terms and subject to
the conditions set forth therein, Suffolk will merge with and into Peoples United (the
Merger
), with Peoples United as the surviving corporation in the Merger. Concurrently with the Merger or at such later time as
Peoples United may determine, Suffolks wholly-owned subsidiary, The Suffolk County National Bank of Riverhead, will merge with and into Peoples Uniteds wholly-owned subsidiary, Peoples United Bank, National Association
(the
Bank Merger
). Peoples United Bank, National Association will be the surviving bank in the Bank Merger. The Merger Agreement was previously filed as Exhibit 2.1 to Suffolks Current Report on Form 8-K filed on
June 28, 2016.
On September 27, 2016, Suffolk, Peoples United and the individual defendants in the previously disclosed
actions related to the Merger styled as
Thaler/Howell Foundation
v.
Suffolk Bancorp et al.
, Index No. 609834/2016 (Sup. Ct., Suffolk Cnty.),
Levy
v.
Suffolk Bancorp et al.
, Index No. 610475/2016 (Sup. Ct.,
Suffolk Cnty.), and
Parshall
v.
Suffolk Bancorp, et al.
, Case No. 2:16-cv-04367 (E.D.N.Y.) (the
Actions
) entered into a memorandum of understanding (
MOU
) with the plaintiffs in such
Actions regarding the settlement of the Actions. Pursuant to the MOU, Suffolk agreed to make available additional information to Suffolks shareholders in connection with the Merger (the
Supplemental Disclosures
). The
Supplemental Disclosures should be read in conjunction with the definitive proxy statement in respect of the Merger filed by Suffolk with the U.S. Securities and Exchange Commission and the documents incorporated by reference therein (the
Proxy Statement
). Suffolk, Peoples United and the other defendants in the Actions deny all of the allegations in the Actions, including any allegations asserting a violation of federal or state law, and believe the
disclosures in the Proxy Statement are adequate. Nevertheless, Suffolk, Peoples United and the other defendants have agreed to settle the Actions in order to avoid the costs, disruption and distraction of further litigation.
The MOU contemplates that the parties thereto would enter into a stipulation of settlement with respect to the Actions, which would be subject
to customary conditions, including court approval following notice to Suffolks shareholders. It also contemplates that in the event that the parties enter into such a stipulation of settlement, a hearing would be scheduled at which a court
overseeing the Actions would consider the fairness, reasonableness and adequacy of the settlement. Additional information concerning the proposed settlement will be provided to Suffolks shareholders in due course. If the settlement is finally
approved by the court, it would resolve and release all claims that were brought or could have been brought in the Actions, including claims challenging any disclosure made in connection with the Merger. In addition, in connection with the
settlement, the MOU contemplates that counsel for the plaintiffs in the Actions will file a petition for an award of attorneys fees and expenses in an amount not to exceed $300,000 to be paid by Suffolk or its successor. If the court approves
the settlement contemplated by the MOU, the Actions will be dismissed with prejudice.
The settlement will not affect the merger consideration to be paid to Suffolks shareholders
in connection with the Merger or the timing of the special meeting of Suffolks shareholders, which will be held at The Suffolk County National Bank, Administrative Center, Lower Level, 4 West Second Street, Riverhead, New York on
October 13, 2016 at 10:00 a.m., local time, to vote upon a proposal to adopt the Merger Agreement and related matters.
SUPPLEMENT
TO THE PROXY STATEMENT
The following information supplements the Proxy Statement and should be read in connection with the Proxy
Statement, which should be read in its entirety. To the extent that information herein differs from or updates information contained in the Proxy Statement, the information contained herein supersedes the information contained in the Proxy
Statement. All page references in the information below are to pages in the Proxy Statement, and terms used below have the meanings set forth in the Proxy Statement, unless otherwise defined below. Without admitting in any way that the disclosures
below are material or otherwise required by law, Peoples United and Suffolk make the following supplemental disclosures.
The
Section titled The Merger Background of the Merger commencing on page 39 of the Proxy Statement is hereby updated specifically at page 40 by amending and restating the paragraph commencing with the words Suffolks board
of directors also discussed the benefits of consulting an investment banker
in its entirety as follows:
Suffolks
board of directors also discussed the benefits of consulting an investment banker on industry topics and strategic and transaction developments. As discussed further below, Suffolks board of directors retained KBW to act as its financial
advisor in connection with a possible transaction based on a consideration of, among other factors, KBWs reputation, experience in mergers and acquisitions, valuations, financing, and capital markets, its knowledge of and relationships with
potential transaction partners, and its long-standing relationship and familiarity (resulting from its prior investment banking engagements in connection with Suffolks loan sale and private placement in 2012 and periodic discussions with
Suffolks board of directors on industry topics and strategic developments) with Suffolk, Suffolks strategic goals, and the industry and markets in which Suffolk competes. Suffolks board of directors also consulted with counsel at
Wachtell, Lipton, Rosen & Katz (which we refer to as Wachtell Lipton), longstanding counsel to Suffolk.
The
Section titled The Merger Background of the Merger commencing on page 39 of the Proxy Statement is hereby updated specifically at page 41 by adding the following to the end of the second paragraph:
The confidentiality agreements also prohibited each potential bidder from requesting a waiver of the standstill provisions.
The Section titled The Merger Opinion of Keefe, Bruyette & Woods, Inc., Financial Advisor to Suffolk commencing on page 48 of the
Proxy Statement is hereby updated
specifically at page 53 by adding the following as the final sentence in the paragraph commencing with the words For purposes of the financial analyses described below
:
In addition, using the number of Suffolk common shares, shares of Suffolk restricted stock and Suffolk stock options outstanding as of
June 20, 2016 as provided by Suffolk management, KBW also reviewed with Suffolks board of directors an implied fully diluted transaction equity value of $402 million based on the implied transaction value for the merger of $33.55 per
share of Suffolk common stock and an implied fully diluted market equity value of $278 million based on the June 24, 2016 closing price of Suffolk common stock on the NYSE.
The Section titled The Merger Opinion of Keefe, Bruyette & Woods, Inc., Financial Advisor to Suffolk commencing on
page 48 of the Proxy Statement is hereby updated specifically by amending and restating Footnotes (1) and (2) to the final table on page 54 in their entirety as follows:
(1) Excludes the impact of LTM EPS multiples for three of the selected companies (Kearny Financial Corp., Northfield Bancorp, Inc., and Clifton
Bancorp Inc.), which multiples were considered to be not meaningful because they were greater than 30.0x.
(2) Excludes the impact of the
estimated 2016 and 2017 EPS multiples for two of the selected companies (Kearny Financial Corp. and Clifton Bancorp Inc.), which multiples were considered to be not meaningful because they were greater than 30.0x.
The Section titled The Merger Opinion of Keefe, Bruyette & Woods, Inc., Financial Advisor to Suffolk commencing on
page 48 of the Proxy Statement is hereby updated specifically at page 57, by amending and restating the third bullet point in the paragraph commencing with the words For each selected transaction
in its entirety as follows:
Price per common share to estimated then-current, unreported year EPS of the acquired company taken from consensus street
estimates publicly available prior to announcement of the respective transaction (which were not available for Southeastern Bank Financial Corporation, California Republic Bancorp, American Chartered Bancorp, Inc., Bank of Georgetown,
Community & Southern Holdings, Inc., and CNLBancshares, Inc.); and
The Section titled The Merger Opinion of
Keefe, Bruyette & Woods, Inc., Financial Advisor to Suffolk commencing on page 48 of the Proxy Statement is hereby updated specifically at page 59 by amending and restating the paragraph commencing with the words KBW performed a
pro forma financial impact analysis
in its entirety as follows:
KBW performed a pro forma financial impact analysis that
combined projected income statement and balance sheet information of Peoples United and Suffolk. Using (i) balance sheet estimates as of December 31, 2016 for Peoples United and Suffolk from consensus street
estimates for Peoples United and Suffolk, (ii) EPS consensus street estimates for 2016, 2017 and 2018 in the case of
Peoples United and 2016 and 2017 in the case of Suffolk, (iii) an assumed long-term net income growth rate for Suffolk for fiscal years after 2017 provided by Suffolk management and
(iv) pro forma assumptions that were discussed with KBW by the management of Suffolk and used and relied upon by KBW at the direction of such management, KBW analyzed certain potential pro forma financial effects of the merger on Peoples
United. This analysis indicated the merger could be accretive relative to Peoples Uniteds estimated 2017 EPS and estimated 2018 EPS by 1.3% and 2.0%, respectively, and dilutive to Peoples Uniteds estimated tangible book value
per share as of December 31, 2016 by 1.6%. Furthermore, the analysis indicated that, pro forma for the merger, each of Peoples Uniteds tangible common equity to tangible assets ratio, leverage ratio and Tier 1 Risk-Based Capital
Ratio as of December 31, 2016 could be higher and Total Risk Based Capital Ratio as of December 31, 2016 could be lower. For all of the above, the actual results achieved by Peoples United following the merger may vary from the
projected results, and the variations may be material.
The Section titled The Merger Opinion of Keefe,
Bruyette & Woods, Inc., Financial Advisor to Suffolk commencing on page 48 of the Proxy Statement is hereby updated specifically at page 59 by amending and restating the paragraph commencing with the words KBW performed a
discounted cash flow analysis of Suffolk
in its entirety as follows:
KBW performed a discounted cash flow analysis of
Suffolk to estimate a range for the implied equity value of Suffolk. In this analysis, KBW used consensus street estimates of Suffolk for 2016 and 2017 as well as assumed long-term net income and asset growth rates for Suffolk provided
by Suffolk management and assumed discount rates ranging from 9.0% to 12.0% which were selected taking into account a capital asset pricing model implied cost of capital calculation using, among other things, the 10-year treasury yield and
Suffolks 2 Year Daily Adjusted Beta per FactSet Research Systems as of June 24, 2016 and certain cost of capital data from the Duff & Phelps 2015 Valuation Handbook. Suffolks 2 Year Daily Adjusted
Beta as of June 24, 2016 was 0.84 per FactSet Research Systems, and none of Peoples United, Suffolk or KBW assumes any responsibility for such data. The ranges of values were derived by adding (i) the present value of the
estimated excess cash flows that Suffolk could generate over the five-year period from December 2016 through 2021 as a standalone company, and (ii) the present value of Suffolks implied terminal value at the end of such period. KBW
assumed that Suffolk would maintain a tangible common equity to tangible assets ratio of 8.00% and would retain sufficient earnings to maintain that level. Estimated excess cash flows were calculated generally as any portion of estimated earnings in
excess of the retained amount assumed. In calculating the terminal value of Suffolk, KBW applied a range of 13.0x to 17.0x estimated 2022 net income. This discounted cash flow analysis resulted in a range of implied values per share of Suffolk
common stock of $26.62 per share to $37.48 per share.
The Section titled The Merger Certain Suffolk Prospective
Financial Information commencing on page 60 of the Proxy Statement is hereby updated specifically at page 61 by
adding the following as the final sentence in the paragraph commencing with the words Suffolks financial advisor did not rely upon the foregoing financial information
:
Suffolk management also directed Suffolks financial advisor to use and rely upon, for purposes of the forecasted pro forma
financial impact analysis performed by Suffolks financial advisor in connection with its opinion to Suffolks board of directors, pro forma assumptions that included, among other things, cost savings of 50.0% of Suffolks consensus
estimate non-interest expense, phased in 75.0% in 2017 and 100% in 2018; a corporate restructuring charge of $36.0 million (on a pre-tax basis); a tax rate increase to Suffolks earnings from 30.6% to 32.5% due to REIT elimination; a cost of
cash of 1.50% (on a pre-tax basis); certain purchase accounting adjustments (on a pre-tax basis); a core deposit intangible of 2.00% of non-time deposits; and a Durbin Amendment impact (loss) to annual pre-tax net income of ($0.6 million).
IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication is being made in respect of the proposed merger transaction involving Peoples United and Suffolk. Peoples United has filed a
registration statement on Form S-4 with the SEC (and an amendment thereto), which includes a proxy statement of Suffolk and a prospectus of Peoples United, and each party may file other documents regarding the proposed transaction with the
SEC. A definitive proxy statement/prospectus has also been sent to the Suffolk shareholders seeking the required shareholder approval. Before making any voting or investment decision, investors and security holders of Suffolk are urged to carefully
read the entire registration statement and proxy statement/prospectus and any other relevant documents filed with the SEC, as well as any amendments or supplements to these documents, because they will contain important information about the
proposed transaction. The documents filed by Peoples United and Suffolk with the SEC may be obtained free of charge at the SECs website at www.sec.gov. In addition, the documents filed by Peoples United may be obtained free of
charge from Peoples United at www.peoples.com under the tab Investor Relations and then under the heading Financial Information, and the documents filed by Suffolk may be obtained free of charge from Suffolk at
www.scnb.com under the tab Investor Relations and then under the tab SEC Filings. Alternatively, these documents, when available, can be obtained free of charge from Peoples United upon written request to Peoples
United Financial, Inc., 850 Main Street, Bridgeport, Connecticut 06604, Attn: Investor Relations, or by calling (203) 338-4581, or from Suffolk upon written request to Suffolk Bancorp, 4 West Second Street, Riverhead, New York 11901, Attn:
Investor Relations, or by calling (631) 208-2400.
Peoples United and Suffolk and certain of their respective directors and executive officers
may be deemed to be participants in the solicitation of proxies from the shareholders of Suffolk in favor of the approval of the merger. Information regarding Peoples Uniteds directors and executive officers is contained in Peoples
Uniteds Annual Report on Form 10-K for the year ended December 31, 2015 and its Proxy Statement on Schedule 14A, dated March 11, 2016, which are filed with the SEC. Information regarding Suffolks directors and executive
officers is contained in Suffolks Annual Report on Form 10-K for the year ended December 31, 2015 and its Proxy Statement on Schedule 14A, dated April 6, 2016, which are filed with the SEC. Additional information regarding the
interests of those participants and other persons who may
be deemed participants in the transaction may be obtained by reading the registration statement and the proxy statement/prospectus. Free copies of these documents may be obtained as described in
the preceding paragraph.
FORWARD-LOOKING STATEMENTS
This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited
to, Peoples Uniteds and Suffolks expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as believe, expect,
anticipate, intend, target, estimate, continue, positions, plan, predict, project, forecast, guidance,
goal, objective, prospects, possible or potential, by future conditional verbs such as assume, will, would, should, could or
may, or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time, are difficult to predict and are generally beyond the
control of either company. Forward-looking statements speak only as of the date they are made and neither company assumes no duty to update forward-looking statements. Actual results may differ materially from current projections.
In addition to factors previously disclosed in Peoples Uniteds and Suffolks reports filed with the SEC and those identified elsewhere in
this communication, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: ability to obtain regulatory approvals and meet other closing conditions to the
merger, including approval by Suffolk shareholders on the expected terms and schedule, and including the risk that regulatory approvals required for the merger are not obtained or are obtained subject to conditions that are not anticipated; delay in
closing the merger; difficulties and delays in integrating the Suffolk business or fully realizing cost savings and other benefits; business disruption following the merger; changes in asset quality and credit risk; the inability to sustain revenue
and earnings growth; changes in interest rates and capital markets; inflation; customer acceptance of Peoples Uniteds products and services; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the
introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and
divestitures; economic conditions; the impact, extent and timing of technological changes; capital management activities; litigation; increased capital requirements, other regulatory requirements or enhanced regulatory supervision; and other actions
of the Federal Reserve Board and legislative and regulatory actions and reforms.
Annualized, pro forma, projected and estimated numbers are used for
illustrative purpose only, are not forecasts and may not reflect actual results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Dated: September 28, 2016
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SUFFOLK BANCORP
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By:
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/s/ Howard C. Bluver
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Name:
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Howard C. Bluver
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Title:
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President & Chief Executive Officer
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