How the Independent-Meridian deal materialized

Independent Bank in Hanover, Mass., initially balked at making an offer for Meridian Bancorp in Peabody, Mass. 

The $13.8 billion-asset Independent, when first approached about a potential deal in January, passed, citing a need to focus on other priorities, according to a recent regulatory filing tied to the pending acquisition. 

But it only took senior management a few weeks to reconsider talking to the $6.5 billion-asset Meridian. The companies announced a $1.2 billion merger on April 22; the deal is expected to close in the fourth quarter. 

The first real discussion about a possible deal happened in January, when Raymond James, as part of “customary marketing efforts,” met with Independent. Raymond James had already met Meridian and would represent the company during merger negotiations.

Christopher Oddliefson, Independent’s CEO, told Raymond James on Jan. 22 that Independent “had other ongoing potential projects that it was currently focused on," adding that he “would get back” to the investment bank, the filing said. 

The outreach led Independent’s leaders to begin discussing a potential deal. Independent presented an offer on Jan. 29 with a range of exchange rations that roughly valued Meridian at $1.1 billion.

Meridian, through Raymond James, told Independent that the pricing “was inadequate and discussions were discontinued … after Independent indicated it was unwilling to increase the proposed pricing range,” the filing said.

Independent returned on Fed. 24 with an offer valued at roughly $1.27 billion even though the exchange ratio it pitched was equal to the high end of the range it proposed a month earlier.

Independent’s stock price had appreciated at a faster rate than Meridian’s over that period, increasing by 17.3% between Jan. 29 and Feb. 24. Meridian’s stock rose by 13% during that time.

Independent and Meridian on March 4 entered into a nonbinding indication of interest, a mutual exclusivity agreement and a mutual nondisclosure agreement, allowing each company to ramp up due diligence. 

The first draft of the merger agreement was circulated on April 1, and negotiations continued over the next three weeks. Each board unanimously approved the merger on April 22, and it was announced later that day. 

The deal priced Meridian at 150% of its tangible book value. 

“This merger is consistent with our strategy of acquiring banks in overlapping and adjacent markets who share our relationship-focused style of banking,” Oddleifson said in a press release announcing the deal. 

The acquisition is expected to be 7.9% accretive to Independent’s tangible book value and 23% accretive to its 2022 earnings per share, taking into account planned cost savings.

Independent plans to cut 45% of Meridian’s annual noninterest expenses, or roughly $45 million. It expects to incur $64 million of merger-related expenses. 

Richard Gavegnano, Meridian’s president and CEO, will serve as a consultant to Independent for four years after the deal closes, the recent filing said. 

The filing disclosed that Gavagnano will receive roughly $9.4 million upfront to settle the termination of his employment agreement with Meridian, along with $2 million annually under the consulting arrangement. Gavagnano agreed to a four-year noncompete agreement that begins when the merger closes.