FleetBoston to buy Summit Bancorp for $7 bn

Under the terms of the agreement, each Summit share would be exchanged for 1.02 shares of Fleet, valuing Summit’s stock at $39.78 per share based on Friday’s closing price on the New York Stock Exchange. Fleet said the offer represented a 15.7 per cent premium over Summit’s closing price on Friday.

Fleet has already had a presence in New Jersey thanks to its 1996 purchase of bank branches in the state that had been owned by Britian’s National Westminster Bank Plc.

Monday’s proposed deal comes after Summit has struggled to reap lending profits in the US Northeast, a highly competitive region. "Summit seems to have struggled over the last several years to identify a profitable path," Mark Primeau, an executive vice president of Eastern Bank Corp who worked for Fleet for 10 years, said last Wednesday. The deal had been rumoured to be in the works since last week, driving Summit’s shares up 24 per cent.

The purchase fits in with Fleet’s top priorities, which include expanding its retail banking operations, its money management arm and its commercial finance operation. Analysts also noted that Fleet is an old hand at bringing companies together. "Fleet has been an active acquirer of both banks and non-banks over the past several years and has developed strong integration skills," analyst Michael Plodwick of Lehman Brothers wrote last week in a research note.

The deal, which has been approved by the board of directors of both companies, is expected to immediately add to Fleet’s earnings and is expected to close by March 31, 2001.

Summit CEO Joseph Semrod would be named a vice chairman of FleetBoston Financial, the bank said. The purchase, which is expected to be tax free to Summit shareholders, would be treated as a pooling of interests for accounting purposes.

Fleet also said it is rescinding its previous approval of a$2 billion share buyback plan originally granted in April, to comply with the pooling-of-interests accounting rules in the acquisition.