How Cambridge landed deal for Northmark Bank

Northmark Bank in North Andover, Mass., had in-depth discussions to sell to another bank months before agreeing to be sold to Cambridge Bancorp in Massachusetts. 

The $5 billion-asset Cambridge agreed in May to buy the $442 million-asset Northmark for $63 million in stock. 

Northmark, however, had exclusive negotiations with another bank between December 2021 and late January, according to a regulatory filing tied to its pending sale to Cambridge. 

Though the unnamed bank initially offered $98.31 a share for Northmark, it ultimately decided to walk away and the exclusivity agreement was terminated on Jan. 25. 

Northmark’s investment bank contacted Cambridge on March 7, which lead to an in-person meeting between Jane Walsh, Northmark’s president and CEO, and Denis Sheahan, her counterpart at Cambridge. Cambridge gained access to an electronic data room on March 29. 

Cambridge on April 14 proposed an all-stock transaction that valued Northmark at $78.69 a share – 20% less than what was discussed with the unnamed bank. Northmark and Cambridge entered into an exclusivity agreement on April 21. 

Cambridge sent over an initial draft of the merger agreement on May 4. Cambridge revised its proposal on May 9, raising its offer to $82.92 a share. Revised drafts were circulated over the next 10 days.

Northmark’s board approved the merger agreement on May 23. The deal, which is expected to close in the fourth quarter, priced Northmark at 118% of its tangible book value. 

The deal is expected to be 5.8% accretive to Cambridge’s 2023 earnings per share, excluding merger-related expenses. It should take about two years for Cambridge to earn back an estimated 1.7% dilution to its tangible book value.  

Cambridge expects to incur $10.7 million of merger-related expenses. The company plans to cut 35% of Northmark’s annual noninterest expenses.  

"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,” Sheahan said in the press release announcing the deal. 

Walsh, who owns about 13% of Northmark’s outstanding stock, will join Cambridge’s board.