New York Community Bancorp agreed to purchase Astoria Financial Corp., expanding its network in the biggest U.S. banking market in a deal valued at about $2 billion. Both companies’ shares declined.
Astoria shareholders will receive one share of New York Community common stock and 50 cents in cash for each of their shares, the companies said Thursday in a statement. The deal values Lake Success, New York-based Astoria at $19.66 a share, about 15 percent more than its closing price on Oct. 22, the day before Bloomberg reported that it was exploring a sale.
As part of the merger, New York Community said it will prepay $10 billion of wholesale borrowings, resulting in a one-time cost of about $614 million. As a result, future dividends will require regulatory clearance for the next four quarters. The bank will sell stock to raise approximately $650 million in capital to offset that charge.
Shares of New York Community tumbled 8.5 percent to $17.53 in New York at 11:12 a.m., the biggest intraday decline since Aug. 24. Astoria dropped 7.5 percent to $16.56.
“We’ve been prepping for a large merger since the end of 2011 and, now that all the stars have aligned, I have to say: It certainly looks and feels right,” Joseph Ficalora, chief executive officer of New York Community Bancorp, said in the statement.
Ficalora, who will lead the merged company, said the merger combines two firms that both emphasize multifamily lending and focus on the New York region.
Astoria, which has 87 branches, has been under pressure from activist investor Basswood Capital Management LLC to boost its share price. It began working with Sandler O’Neill & Partners this month on a potential sale.
Takeovers of small banks have been accelerating this year as bigger players look for growth while grappling with low interest rates that make it hard to make money on loans. BB&T Corp. in August agreed to pay $1.8 billion for National Penn Bancshares Inc. First Niagara Financial Group Inc. hired an adviser to explore a sale, people familiar with the matter said in September.
The combined company will have 241 offices in the metro New York area, including all of New York City, Long Island and Westchester County, the companies said. Including Ohio, Arizona, Florida and New Jersey, the bank will have more than 350 branches and $37.3 billion in deposits.
New York Community generated $3.7 billion of commercial real estate loan volume in New York City in the first half of the year, according to data compiled by CrediFi, a firm that analyzes the market for property loans. That put the bank ahead of JPMorgan Chase & Co., which had $3.2 billion in the region, and Bank of America Corp., with $3 billion.
New York Community was advised by Goldman Sachs Group Inc. and Credit Suisse Group AG in the transaction, and legal counsel was provided by Sullivan & Cromwell LLP. Sandler O’Neill served as adviser to Astoria and Wachtell, Lipton, Rosen & Katz was legal counsel.