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Cambridge (CATC) Stock Up on $63M Merger Deal With Northmark

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Shares of Cambridge Bancorp CATC gained 2% following the announcement of the company’s merger with Northmark Bank. CATC, the holding company for Cambridge Trust Company, has agreed to acquire North Andover, MA-based Northmark Bank in an all-stock deal. The move is part of Cambridge’s strategy of combining with high-quality financial institutions in targeted, attractive markets.

The closing of the deal, subject to regulatory nod, approvals by Northmark shareholders, and other customary closing conditions, is expected in the fourth quarter of 2022.

Through the addition of Northmark’s three full-service banking offices in the attractive communities of North Andover, Andover and Winchester, MA, the merger will help CATC expand its presence in Massachusetts. Moreover, post the completion of the merger, the combined company will be well-positioned to benefit from a deepened focus on growth opportunities.

Terms of the Deal & Financial Impact

Based on Cambridge’s closing share price on May 20, 2022, the transaction is valued at $79.54 per share of Northmark common stock or $63 million in aggregate. Per the agreement, each share of Northmark will be exchanged for 0.9950 shares of Cambridge common stock.

Total estimated transaction expenses are $10.7 million pre-tax and $8.1 million after-tax. The merger is expected to result in cost savings of 35% of Northmark’s non-interest expenses.

Moreover, the deal is projected to be 5.8% accretive to Cambridge’s mean consensus analyst 2023 earnings per share (excluding transaction costs). It will be 1.7% dilutive to the company’s tangible book value per share, with an anticipated earn-back period of 2.25 years.

Notably, as of Mar 31, 2022, Northmark had $442 million of total assets, $314 million of gross loans and $381 million of deposits. Based on the data as of Mar 31, the combined company is expected to have $5.5 billion in assets, $3.7 billion in gross loans and $4.9 billion in deposits.

Management Comments

Denis Sheahan, the chairman, president and CEO of Cambridge Trust, stated, “We are pleased to announce the strategic combination of Cambridge Trust and Northmark Bank. Since Northmark's founding in 1987, the management team and board have created a franchise that provides exceptional service to its clients in locations where Cambridge currently does not have banking offices. Northmark's dedication to providing individuals and businesses with customized attention and tailored financial solutions will greatly complement our broad range of products and services, including private banking and wealth management.”

Jane Walsh, the founder, president and CEO of Northmark, said, “We are excited about the opportunity to partner with Cambridge Trust. Cambridge Trust's strong commitment to its clients, employees and communities closely align with Northmark's focus on relationships and civic and corporate responsibility.”

So far this year, shares of Cambridge have lost 12.7% compared with a 14.9% decline of the industry.


Zacks Investment Research
Zacks Investment Research

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Currently, CATC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inorganic Growth Efforts by Other Firms

With a view to help its clients build long-term financial wellness, Truist Financial Corporation TFC acquired the award-winning gamified finance mobile app, Long Game. Long Game changes the way people engage with their banks. The mobile finance app uses prize-linked savings and casual gaming to motivate smart financial behavior.

Truist Financial is expected to use Long Game’s innovative technology to inspire and build better lives and communities.

Itaú Unibanco Holding S.A ITUB announced on Apr 29, 2022, the completion of its acquisition of 11.36% equity interest in the total capital of XP Inc. for a deal value of R$ 8 billion.

The acquisition of XP is not expected to have any material impact on Itaú Unibanco’s current fiscal year’s results. Further, there will be no change in the corporate governance of XP as a result of the acquisition. ITUB received approval from the Central Bank of Brazil to acquire the minority interest in XP in November 2021.

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