Valley Chases Wealthy to Boca Raton in Year’s Top Bank Deal

May 08, 2014 6:02 pm ET

(Updates with comments from CEO and hedge-fund manager starting in the fourth paragraph.)

May 8 (Bloomberg) -- Valley National Bancorp, the New Jersey-based lender, will buy Florida’s 1st United Bancorp for about $312 million in the biggest U.S. bank takeover announced this year.

Investors will receive 0.89 of Valley stock for each 1st United share, the companies said today in a statement. The deal will give Valley access to a growing population, including people who moved from the New York metropolitan region and already know Valley’s brand, Chief Executive Officer Gerald Lipkin said in an interview. 1st United advanced 9.3 percent to $7.99, while Valley fell 2.9 percent to $9.48.

Valley will seek more targets in New York, New Jersey and Florida to expand lending, Lipkin said. The company looked at banks closer to home before pursuing 1st United, he said.

“You give me a commercial bank that’s willing to sell itself to Valley at the type of multiples we’re getting in Florida, with the potential growth this bank has, and we’ll be only too happy to buy it,” Lipkin said in a phone interview. “We looked at each and every state between New Jersey and Florida and literally ruled out each and every one of them.”

Nationwide, potential suitors have said they’re holding back on bids for lenders, citing new U.S. rules that raise costs and the delay in M&T Bank Corp.’s acquisition of New Jersey’s Hudson City Bancorp. That takeover is still pending after more than 18 months of scrutiny by regulators of controls at Buffalo, New York-based M&T.

Combined Company

The 1st United deal is expected to be completed in the fourth quarter, according to the statement. The combined company would have 225 branches and more than $18 billion in assets.

Valley is based in Wayne and has 204 outlets in central New Jersey and New York’s Manhattan, Brooklyn, Queens and Long Island, while 1st United is based in Boca Raton with 21 branches. The offices are in areas of Florida where personal income and population growth have outpaced other parts of the state, Lipkin said.

“Who’s moved there? It’s the wealthy people,” said Lipkin, 73. “It’s the guy who relocated his business there.”

A deal outside Valley’s core market probably won’t help results, said Gary Townsend, a former regulator who now runs the hedge fund GBT Capital Management LLC in Chevy Chase, Maryland.

“It’s a prayer and a hope,” Townsend said in a phone interview. “I don’t see how an out-of-market acquisition materially or in any way adds to the value of the franchise.”

Valley was advised by MG Advisors Inc., investment bankers at Sandler, O’Neill & Partners LP, and the law firm of Day Pitney LLP, according to the statement. 1st United was advised by Stifel Financial Corp.’s Keefe, Bruyette & Woods Inc. and the law firm of Gunster, Yoakley & Stewart PA.