Shares of Vermont-based bank Chittenden Corp. skyrocketed 24.5% to close at $35.15 Wednesday after People's United Financial announced it will acquire it for $1.9 billion. The combined entity will have assets of approximately $22 billion. Chittenden shareholders will be able to choose either cash or People's United shares valued at $20.35 plus 0.8775 of the shares' five-day average closing price. The offer values Chittenden shares at $37.00, a 31% premium to Tuesday's close. People's CEO John Klein said the acquisition of Chittenden, which has branches in Vermont, New Hampshire, Massachusetts and Maine, will help People's broaden its New England presence and will provide a combined rate of return greater than People's cost of capital. "We believe we are buying a superior performing company," he said. "This deal conforms to all the strategic and financial objectives that we set forth during the second-step conversion" from a state-chartered bank to a federal thrift. S&P has affirmed its credit ratings on both banks; Fitch will maintain its rating on People's but will downgrade Chittenden's A- rating. The transaction has been approved by both boards of directors and is expected to close in Q1.
Sources: Press release, TheStreet.com, Wall Street Journal, Bloomberg, MarketWatch, AP I, II, III
Commentary: The Truth About Personal Savings and Debt Levels • US Savings Rate Based On Outdated Methods of Calculation • Jim Cramer's Mad Money Lightning Round Picks, March 22
Stocks/ETFs to watch: Chittenden Corp. (CHZ), People's United Financial, Inc. (NASDAQ:PBCT). Competitors: Bank of America Corp. (NYSE:BAC), KeyCorp (NYSE:KEY). ETFs: KBW Regional Banking ETF (NYSEARCA:KRE)
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