PE-backed National Penn agrees to buy TF Financial for $138 mln

National Penn Bancshares, a portfolio company of Warburg Pincus, has agreed to acquire TF Financial Corp. for $138 million. The transaction is expected to close in late 2014. Sandler O’Neill & Partners provided financial advice to National Penn on the deal while Keefe, Bruyette and Woods was financial advisor to TF Financial. Headquartered in Newtown, Penn., TF Financial’s principal subsidiary is 3rd Fed Bank, which runs 18 retail and commercial banking offices in Pennsylvania and New Jersey.

PRESS RELEASE

ALLENTOWN, Pa. & NEWTOWN, Pa.–(BUSINESS WIRE)–The Boards of Directors of National Penn Bancshares, Inc. (“National Penn”) (Nasdaq: NPBC) and TF Financial Corporation (“TF Financial”) (Nasdaq: THRD) announced today that the companies have entered into a definitive merger agreement whereby National Penn will acquire TF Financial. TF Financial and its wholly-owned subsidiary, 3rd Fed Bank, with approximately $846 million in assets, $609 million in loans, and $692 million in deposits at March 31, 2014, operate 18 full service retail and commercial banking offices in the attractive markets of Bucks and Philadelphia Counties in Pennsylvania, and Burlington, Mercer, and Ocean Counties in New Jersey.
TF Financial shareholders will receive either $42.00 in cash or 4.22 shares of National Penn stock, based on their election, for an estimated aggregate transaction value of $138 million. Aggregate consideration will be limited to 40% cash and 60% stock. This purchase price equates to approximately 20x earnings and 144% of tangible book value. There are 3,151,162 shares of TF Financial issued and outstanding. Stock options for 325,644 shares will be redeemed for cash.
Scott V. Fainor, president and CEO of National Penn stated, “We are excited about the affiliation with a high quality company like TF Financial. Expanding our market presence in the attractive Bucks and Philadelphia Counties in Pennsylvania and the opportunity to enter New Jersey fits perfectly into our strategy.” Mr. Fainor continued, “We have been disciplined in our acquisition approach and this transaction further leverages our strong capital base, as well as accretes both short-term and long-term shareholder value.”
Kent Lufkin, president and CEO of TF Financial commented, “Combining with a company that has the strength of National Penn will certainly benefit our customers, community, employees, and shareholders. We look forward to being able to offer National Penn’s expanded array of banking, insurance, investments and trust products and services, while maintaining the commitment to outstanding service that our customers have come to appreciate.”
Pro forma Financial Impact
Based upon cost savings estimated to be 40% of TF Financial’s current operating expenses and inclusive of closing two branches that overlap in Doylestown, Bucks County, Pennsylvania, earnings per share accretion will be approximately $0.04 per share subsequent to these expense synergies being realized. A non-recurring charge of approximately $10 million will be recorded at the closing of the transaction. Purchase accounting adjustments will include a credit mark of approximately 2% of TF Financial’s loan portfolio.
The transaction will result in tangible book value dilution of approximately 2% and an earn-back period of approximately 4 years. Through the structure of the TF Financial acquisition, and the repurchase of approximately 5% of National Penn’s outstanding shares in January of 2014, National Penn has prudently leveraged its capital base.
Capital Ratios
12/31/13
3/31/14
Pro forma 3/31/14
Tangible common equity / tangible assets 10.41% 9.86% 9.34%
Tier 1 common 14.23% 13.22% 12.64%
Tier 1 leverage 11.63% 10.83% 10.25%
Total risk-based capital 16.72% 15.69% 15.02%
Conditions to Closing
The transaction, which has been unanimously approved by both TF Financial’s and National Penn’s board of directors, is subject to normal and customary conditions, including but not limited to, regulatory approval and the approval of TF Financial shareholders. The transaction is expected to close in late 2014, subject to these required approvals, including the merger of 3rd Fed Bank with and into National Penn’s wholly-owned subsidiary, National Penn Bank.
Advisors to Transaction
Sandler O’Neill & Partners, L.P. served as financial advisor and Reed Smith LLP served as legal counsel to National Penn. Keefe, Bruyette and Woods, Inc., served as financial advisor and Spidi & Fisch, PC served as legal counsel to TF Financial.
About National Penn Bancshares, Inc.:
National Penn Bancshares, Inc., with approximately $8.6 billion in assets, is a bank holding company headquartered in Allentown, Pennsylvania. National Penn Bank operates 111 branch offices comprising 110 branches in Pennsylvania and one branch in Maryland.
National Penn’s financial services affiliates are National Penn Wealth Management, N.A., including its National Penn Investors Trust Company division; National Penn Capital Advisors, Inc.; Institutional Advisors LLC; and National Penn Insurance Services Group, Inc., including its Higgins Insurance and Caruso Benefits Group divisions.
National Penn Bancshares, Inc. common stock is traded on the Nasdaq Stock Market under the symbol “NPBC”. Please visit our Web site at www.nationalpennbancshares.com to see our regularly posted material information.
About TF Financial Corporation:
TF Financial Corporation is a savings and loan holding company headquartered in Newtown, Pennsylvania, whose principal subsidiary is 3rd Fed Bank, a Pennsylvania-chartered, FDIC insured savings bank. 3rd Fed Bank operates 18 full service retail and commercial banking offices in Bucks and Philadelphia Counties in Pennsylvania and Burlington, Mercer, and Ocean Counties in New Jersey.

 

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