Investors Bancorp has amended its merger agreement to acquire American Bancorp of New Jersey.
Under the revised terms of the merger agreement which has been approved by the boards of directors of both companies, 65% of American Bancorp shares will be converted into Investors Bancorp common stock and the remaining 35% will be converted into cash, compared to a 70% stock and 30% cash consideration mix as set forth in the original merger agreement. The exchange ratio of 0.92 share of Investors Bancorp common stock for each share of American Bancorp common stock remains unchanged.
Based on Investors Bancorp’s closing stock price of $7.90 on March 12, 2009, each share of American Bancorp common stock would be valued at approximately $9.11 with the aggregate merger consideration totaling $99m.
Investors Bancorp expects that the decline in transaction value from the original merger agreement date to the amended agreement date will reduce the amount of goodwill created in the transaction from approximately $56m to approximately $13m, increase the anticipated internal rate of return on the transaction from the lower teens to in excess of 20% and reduce the dilution to fully converted tangible book value from 4% to 3%. The impact on Investors Bancorp’s earnings is not expected to differ materially from previously announced expectations regarding the original transaction structure.
The companies also agreed to modify the termination conditions with respect to a decline in Investors Bancorp common stock price. As amended, the agreement allows American Bancorp to terminate the transaction in the event of an absolute decline in Investors common stock of 30% and a 30% relative decline to the SNL Thrift Index. Prior to this amendment, American Bancorp could terminate the agreement in the event of a 20% absolute decline in Investors Bancorp stock price and a 20% relative decline to the SNL Thrift Index. The methodology in calculating the fill provision was also amended.
The transaction is expected to close during the second calendar quarter of 2009, subject to customary closing conditions, including regulatory approvals and approval by American Bancorp’s shareholders.
Citigroup Global Markets acted as financial adviser to Investors Bancorp, and Luse, Gorman, Pomerenk & Schick acted as legal adviser. Keefe, Bruyette & Woods acted as financial adviser to American Bancorp of New Jersey, and Silver Freedman & Taff acted as legal adviser.
