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Provident Financial expanding in New Jersey with $1.3 billion deal

Provident Bank, NJ

Provident Financial Services in Iselin, New Jersey, said on Tuesday it agreed to acquire in-state rival Lakeland Bancorp in Oak Ridge, New Jersey.

The $1.3 billion, all-stock deal would create a $25 billion-asset bank with $20 billion of deposits and branches throughout New Jersey. The companies said the merger would combine two established commercial real estate lenders with complementary ancillary business lines. This includes Provident's fee-based business insurance and wealth management operations and Lakeland's asset-based lending and equipment lease financing units. 

"The scale and profitability of the combined organization will enable us to invest in the future, better compete for market share, and better serve our customers and communities," Anthony Labozzetta, president and CEO of Provident, said in a press release announcing the deal before markets opened Tuesday.

The $13.7 billion-asset Provident said it would issue shares worth about $19.27, based on Monday's closing price of $23.16, for each share of Lakeland. That represents a premium of about 18% to Monday's closing price of $16.29 for Lakeland, which has assets of $10.4 billion.

Provident shareholders would own 58% of the combined company, while Lakeland shareholders would own 42%.

Executives estimated cost savings of about 35% of Lakeland's expense base and a resulting internal rate of return of approximately 20%.

Provident projected the combined company would generate earnings-per-share accretion of 24% in 2024. The buyer expects to earn back tangible book value dilution within four years.

The combined company will operate under the Provident Financial Services name, and the bank unit will operate under the Provident Bank name.

Labozzetta will continue as chief executive of the combined company. Thomas Lyons, Provident's chief financial officer, will continue in that role. The remainder of the executive team will draw from both Provident and Lakeland, the companies said.

Christopher Martin, Provident's executive chairman, will hold the same position on the combined company's board. Thomas Shara Jr., Lakeland's president and CEO, will be executive vice chairman.

"The combination of our companies will allow us to achieve substantially more for our clients, associates, communities, and shareholders than we could alone," Shara said in the release.

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