Filed by Valley National Bancorp
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under the
Securities and Exchange Act of 1934
Subject Company: Merchants New York Bancorp, Inc.
Commission File No. 0-22058
This filing on Form 425 is made to correct a prior 425 filing made on September
8, 2000. Due to a typographical error the number 20% in the twelfth paragraph of
the conference call was mistakenly shown as 28% in the earlier filing.
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements concerning the
financial condition, results of operations and business of Valley following the
consummation of its proposed acquisition of Merchants, the anticipated financial
and other benefits of the proposed acquisition and the plans and objectives of
Valley's management following the proposed acquisition, including, without
limitation, statements relating to the cost savings expected to result from the
proposed acquisition, and anticipated results of operations of the combined
company following the proposed acquisition. Generally, the words "will," "may,"
"should," "continue," "believes," "expects," "anticipates" or similar
expressions identify forward-looking statements. These forward-looking
statements involve certain risks and uncertainties. Factors that could cause
actual results to differ materially from those contemplated by the
forward-looking statements include, among others, the following factors: (1)
cost savings expected to result from the proposed acquisition may not be fully
realized or realized within the expected time frame; (2) operating results
following the proposed acquisition may be lower than expected; (3) competitive
pressure among financial services companies may increase significantly; (4)
costs or difficulties related to the integration of the businesses of Valley and
Merchants may be greater than expected; (5) adverse change in the interest rate
environment may reduce interest margins of the combined company; (6) general
economic conditions, whether nationally or in the market areas in which Valley
and Merchants conduct business, may be less favorable than expected; (7)
legislation or regulatory changes may adversely affect the businesses in which
Valley and Merchants are engaged; or (8) adverse changes may occur in the
securities markets. Readers are cautioned not to place undue reliance on forward
looking statements which are subject to influence by the named risk factors and
unanticipated future events. Actual results may differ materially from
management expectations. Both Valley and Merchants disclaim any obligation to
update or revise any forward looking statements based on the occurrence of
future events, the receipt of new information, or otherwise.
INFORMATION FOR INVESTORS AND SHAREHOLDERS
Valley and Merchants will be filing with the SEC a joint proxy
statement-prospectus with respect to solicitation of proxies of their
stockholders to approve the proposed merger and Valley will be filing a
registration statement with respect to the common stock to be issued in the
merger. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE JOINT PROXY
STATEMENT-PROSPECTUS AND THE REGISTRATION STATEMENT, WHEN EACH OF THESE
DOCUMENTS BECOMES AVAILABLE, BECAUSE EACH OF THEM WILL CONTAIN IMPORTANT
INFORMATION. Investors and securities holders may obtain a free copy of the
joint proxy statement-prospectus and the registration statement (when available)
and other documents filed by Valley or Merchants with the SEC at the SEC's
Internet web site at www.sec.gov. The joint proxy statement-prospectus and the
registration statement (when available) and such other documents filed by Valley
with the SEC will be available free of charge by contacting Valley National
Bancorp, 1455 Valley Road, Wayne, New Jersey 07474, Attention: Dianne Grenz,
telephone: (973) 305-3380. Documents filed with the SEC by Merchants will be
available free of charge by consulting Merchants New York Bancorp, Inc., 275
Madison Avenue, New York, NY 10016, Attention: Corporate Secretary, telephone:
(212) 973-6600. SHAREHOLDERS AND INVESTORS SHOULD READ THE JOINT PROXY
STATEMENT-PROSPECTUS CAREFULLY WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY
VOTING OR INVESTMENT DECISIONS.
INFORMATION ABOUT PERSONS SOLICITING PROXIES
Valley and certain other persons referred to below may be deemed to be
participants in the solicitation of proxies from Valley shareholders to approve
the merger. The participants in the solicitation may include the directors and
certain executive officers of Valley, who may have an interest in the
transaction including as a result of holding shares of Valley common stock. A
detailed list of the names and interests of Valley's directors and certain of
Valley's executive officers is set forth in a filing under Rule 14a-12 made by
Valley with the SEC on September 7, 2000. This filing and other documents filed
by Valley or Merchants with the SEC may be obtained without charge at the SEC's
Internet web site at www.sec.gov.
VALLEY NATIONAL BANCORP
ANALYSTS CONFERENCE CALL
SEPTEMBER 6, 2000
11:00 A.M.
Gerald Lipkin: Good morning everybody. Welcome to our conference. Before we
start, as you are aware, our attorneys require us to make several statements.
This presentation contains forward looking statements concerning the financial
condition, results of operations and business of Valley following the
consummation of its proposed acquisition of Merchants. These forward looking
statements involve certain risks and uncertainties. Actual results may differ
materially from management's expectations. Both Valley and Merchants disclaim
any obligations to update or revise any forward looking statements. For
additional information on forward looking statements, please consult the legend
in the press release and the analyst presentation filed on SEC Form 425. Thank
you for all calling in.
Needless to say, we're all very excited about this acquisition. Aside from being
the first time a New Jersey bank has purchased a Manhattan-based bank, usually
the other way around, this bank has long been on our wish list to enter
Manhattan. The opportunity just wasn't there until now. We're very excited about
this opportunity. As you can see, the consideration is 100% common stock. The
fixed exchange ratio of .7634 Valley shares exchanged for each Merchants' share
results in 19% pro forma ownership. The transaction value, including options, is
approximately $375 million or 16 times estimated 2000 earnings, 14 times
earnings adjusted for anticipated cost savings. The transaction value per common
share is $20.04. The accounting treatment is a pooling of interests.
There is a stock option agreement in which Merchants has issued an option to
Valley to purchase 19.9% of its pro forma outstanding shares. The board and
management representation will result in three Merchants directors joining the
Valley holding company board. All of Merchants' senior officers will be joining
the Valley management team. The expected closing date is the first quarter of
2001. The strategic rationale for the transaction is, number one, the excellent
revenue growth prospects through the sale of Valley's products to Merchants'
customer base. The expansion of Merchants' almost non-existent consumer and
residential mortgage lending portfolios presents an unusually attractive
opportunity for Valley.
We plan to considerably expand upon Merchants' consumer deposit base. We will be
adding an ATM infrastructure to Merchants' franchise. This, coupled with the
introduction of low-cost consumer checking and a wide array of consumer CD
products adds further to our excitement over this transaction.
We will be issuing debit cards to their customers. We will be introducing our
trust department, our asset management and insurance services and we expect all
of this will be done with a very minimal additional marginal cost. We have the
capacity within our own computer systems and in our management structure to
handle the increased volume as it is.
Similarly, we see a very close cultural alliance between the two institutions.
We have a similar culture. Both of us are focused on strong asset quality, a
high level of customer service and earnings. Each of us successfully has
competed with the major money center banks in Manhattan for decades. Going into
New York and competing with the larger banks will certainly not be anything new
to Valley. Obviously, the way that Merchants has been successful proves that it
can be done.
We are both middle market lenders. We both have a high degree of senior
management involvement in commercial lending and our senior management in both
institutions is highly accessible to all customers. The close proximity of our
two institutions simply removes an artificial state line barrier. All of the
existing offices of Merchants are within approximately 15 miles of our
headquarters. Most of the Merchants customers are within 45 minutes by
automobile of Valley's headquarters. This will enable us to expand our franchise
into an economically viable, densely populated area while still maintaining our
much cherished super community bank model.
We also view this as an opportunity to add additional offices in New York. That
includes both Manhattan as well as lower New York State because, as you know,
our franchise runs right up to the New York border and there are certain
locations in Rockland County that would become very attractive or have been very
attractive to us and as we now have a New York franchise, we will be able to
expand in that direction as well.
We believe there is a very low business risk for a very significant Manhattan
franchise. We're very excited about the fact that the composition of Merchants'
assets really pose a very small risk as far as Valley is concerned. They have a
very high quality investment portfolio, which comprises 60% of their total
assets. When you look at the bank and you know it's a $1.5 billion institution,
it really has the asset structure of a bank of about 2/3 that size, so the
transaction risk actually is reduced considerably. It has a very well managed,
high quality loan portfolio with sufficient reserve. We are very pleased with
what we have seen in their loan portfolio.
An overview of Valley: I think most of you know that we are approximately a $6.3
billion institution with net loans of $4.6 billion and securities of $1.3
billion, total deposits just over $5 billion. I really think you have to focus
on the fact that over the last 12 months, our return on average equity has been
19.66%. Our latest 12 month return on average assets is 1.75% and our efficiency
ratio, as most of you know, is 44.79%.
It's interesting when you look at Merchants and you can focus that they are a
$1.4 billion bank, their latest 12 month return on average equity was 20.5%.
Their latest 12 month return on average assets was 1.54% and an efficiency ratio
of 42.34%. Not too shabby. When you put us together, I think it exemplifies the
attractiveness of the two institutions. We will have total assets of $7.7
billion, net loans of a little over $5 billion, securities of a little over $2
billion, deposits of almost $6 billion, borrowings of $1 billion, equity of $617
million and a market cap of close to $2 billion. On a pro forma basis, we expect
very strong continued financial results. Valley expects to continue to deliver
among the best and most consistent performance of any super community bank in
the nation.
It's our goal that our return on equity will remain in the 20% range, our return
on assets will remain in the 1.75% range and our efficiency ratio in the low
40's. The transaction is expected to be accretive to 2001 earnings per share. I
might add we are expecting to be accretive before expected revenue enhancements.
We anticipate savings in the 15% to 20% range of Merchants non-interest expense.
That translates to roughly a $5 million number. Most of that money is going to
come from data processing and operations consolidation. As I mentioned before,
Valley runs its own data processing systems and we do have excess capacity
within our system. We expect there will be savings on accounting fees,
insurance, audit, holding company costs and modest back room salary saves. There
will be one-time transaction costs, which we consider to be reasonable. Those of
you who have met with me know our disdain for large, one-time charges. We
anticipate the one time charge in this case to be something in the $6 to $8
million range. The top line revenue growth is expected to accelerate as a result
of our introducing all of the new products to the current Merchants base.
In summary, we feel this is a natural extension of Valley's franchise. We're
getting together with another institution that has a very similar culture, a
very similar focus on asset quality and earnings. It will provide an excellent
platform for Valley's fast growing middle market banking model. It creates new
lending and fee income opportunities. I point out that Merchants doesn't have
any ATMs for example. This is a product that we drive our own ATM system. We
will be introducing ATMs immediately. We expect the transaction will be
accretive. It enhances Valley's long term earnings prospects. It has a very low
execution risk.
As you can see from the map, it's kind of hard to tell where our branches ended
and theirs began. If it weren't for the fact that it was across the Hudson
River, they'd be contiguous. They'd be touching each other. If there are any
questions, operator? We're open.
Operator: We have a question from the line of Brian Long with Chesapeake
Partners.
Voice: I was wondering if you could just detail the specific regulatory
approvals you need? Tell us a little bit about the background, how the deal came
about? Who were the investment bankers advising on the transaction?
Mr. Lipkin: The regulatory approvals are rather routine. We need the Federal
Reserve, the OCC to approve the transaction. The shareholders, of course, have
to approve it at both institutions.
Voice: What about New York state?
Mr. Lipkin: No.
Voice: The background and the investment bankers?
Mr. Lipkin: It was really a situation where two banks were close to each other
for many, many years and were attracted to each other. It was more banker to
banker. CIBC, Richard Kelly actually did the introduction initially.
Voice: Did the banks get fairness opinions?
Mr. Lipkin: Yes.
Voice: Did CIBC advise both companies?
Mr. Lipkin: No. Sandler O'Neill advised Valley as to the fairness opinion.
Operator: We have a question from the line of Adam Barkstrom with Legg Mason.
Voice: I had a question about Merchants. You mentioned 60% of their balance
sheet on the asset side was composed of securities and I'm looking at the
overview sheet you have here in your investor's packet. What do they have in
borrowings? How much of that is a leveraged strategy?
Mr. Lipkin: Very small.
Voice: What's that.
Mr. Lipkin: Very small.
Voice: Do you envision maintaining that? Is that going to be a source of
liquidity for you going forward? Is there going to be any delevering there on
the balance sheet?
Mr. Lipkin: For one thing, we will be able to use some of that liquidity to
convert into loan growth. We see substantial opportunity for introduction of our
retail products. They have a very liquid investment portfolio. They have a very
strong cash flow coming out of it. As fast as that comes due we would like to be
putting it into loans. Obviously, the size of the investment portfolio even for
the combined bank is disproportionately high.
Voice: Why is that? Why do they have such a high . . . if the loan demand in
that market is so strong?
Mr. Lipkin: Their commercial loan demand has been very strong. They have just
not gone after the consumer demand. It hasn't been their bailiwick. It's an area
that they have passed over. We, on the other hand, have a real strong background
in that area and we think we know where to develop that business.
Voice: Is that going to be primarily in the residential mortgage front?
Mr. Lipkin: It's going to be all across the consumer products. They do not do
home equity loans. They don't do residential mortgage loans. They don't have
overdraft checking accounts. They don't have a debit card. These are all
consumer products that we have developed over the years with a great deal of
volume, not to mention our auto lending.
Voice: Now, on auto lending, is that going to be in big demand in Manhattan?
Mr. Lipkin: Not everybody who banks with them lives in Manhattan. You know, a
lot of their people live in northern New Jersey. While they may commute by
train, they do keep a car at home. I just think that there's going to be a very
strong demand for our consumer products.
Voice: The $6 to $8 million hit, one time charge, that's going to come when? Is
that first quarter 2001 or before?
Mr. Lipkin: Probably 2001, yes. It's relatively modest relative to the size of
the transaction.
Operator: We have a question from the line of Kevin Szocik with KBW.
Voice: Are there any walkaways associated with the deal?
Mr. Lipkin: No.
Voice: I was wondering if you might be able to give us a little more guidance on
the extent that the deal will be accretive to 2001? I just kind of ran through a
rough model, I'm coming up with more like a push. The other part of that
question is given that it is a pooling deal and you guys recently announced a
share repurchase authorization of three million shares, will that be rescinded?
Has that been taken out of the estimates for next year as far as consideration
for accretion is concerned?
Mr. Lipkin: It will be rescinded. We can't do a repurchase at the same time.
Voice: Will the deal still be accretive taking out the stock repurchase in the
Valley estimate for next year?
Mr. Lipkin: Yes. That was not factored in.
Voice: Can you give any more guidance as to how accretive the deal is, either on
a per share basis or on a percentage basis?
Mr. Lipkin: It's really nominally accretive before we add revenue enhancement.
Operator: We have a question from the line of Roberta Probber with Ryan, Beck.
Voice: Can you talk about selling consumer products to Merchants' customer base,
which they have not traditionally done. Do you anticipate a special marketing
campaign? How do you expect to reach their customers in that way?
Mr. Lipkin: There are lots of ways that we can reach their customers. There is
direct marketing. Obviously, we have the names and addresses of all of them, so
we can go on a one on one basis. We will do some media marketing. I think we're
going to be coming in there because of our current cost structure operating the
bank from New Jersey I think we can actually operate on a lower cost than some
of the banks that are presently in the area. As a result of that, we're going to
be able to introduce products like a lower cost checking account than most
people in New York are used to seeing. We're going to be able to introduce our
lending products at a very competitive rate. Remember, we've survived very well
coming up against the big New York City money center banks. They have all these
same products right now. In New Jersey, our branches literally fall in the
shadow of their headquarter buildings.
Voice: I would just expect that there would be some expenses associated with
marketing, at least initially, given their customers.
Mr. Lipkin: That's true. There are some minor expenses. Minor in relationship to
the amount of volume of business that we'll bring in.
Voice: What are you doing with their options?
Mr. Lipkin: They're being flipped into Valley options.
Operator: We have a follow up question from the line of Gerard Cassidy with
Tucker Anthony.
Voice: On the securities of Merchants, is there much of a mark-to-market on that
portfolio or in the $814 million that you list, is that pretty much carried at
market?
Mr. Lipkin: It's pretty close. It's very close. There's a very slight relative
depreciation.
Voice: Also, how long do you think it will take you to get the securities
portfolio down to a size that you guys think is more . . . on a pro forma basis,
that is?
Mr. Lipkin: That depends on how aggressive we really want to be. That's
dependent on a number of factors. For one thing, it depends upon how quickly we
can grow the consumer volume, to move it over there, to export it. I really
don't think it's going to be that long of a time frame. Probably 18 months.
Voice: In the deposit breakout on the overview at least, I don't have a
breakout. Can you classify of their $927 million in deposits what you would
consider core non-CD type deposits?
Mr. Lipkin: It's almost all core deposits. They have $350 million in time,
almost all the rest of it is in demand, money market accounts. It's interesting.
I didn't mention it earlier but 98% of their loans are floating interest rate
loans. They float with market which gives us a very good balance. If there was a
criticism on Valley, it's that we've become overly dependent on fixed rate
loans. This brings us back into equilibrium.
Voice: You guys have had great success over the years in making acquisitions
over in Jersey and integrating the companies effectively into what you're doing.
I know it's only 15 miles away but all of us who are familiar with your
territory understand that it's maybe a little further because of the river. The
question really has to do with cost savings. You've done so well in the past
garnering the cost savings that you've set out for, whatever bank it has been in
the past. 15% to 20% seems to be a number that you're comfortable with?
Mr. Lipkin: Absolutely. We're using a number of roughly $5 million. We believe
three quarters of that is like a piece of cake. We have the excess capacity in
our data processing systems. We think we'll save 90% of the data processing
costs. I don't care where they're located. That's a fact. They're buying it from
a service bureau now. It's coming in over the line.
Voice: One final thing. The way the press release read it looks like you're
going to, for the stock that you issue, it will be new stock. Is that correct or
will you buy some on the open market?
Mr. Lipkin: No, we can't buy it on the open market right now.
Operator: We have a follow up question from the line of John Klein with Sandler
O'Neill.
Voice: Just wanted to follow up on the cost savings a little bit. You mentioned
half of it is really a slam dunk to you guys. Just wondering.
Mr. Lipkin: It's more than half. It's about 2/3.
Voice: 2/3?
Mr. Lipkin: Yes, between the data processing and the accounting fees, the
insurance saves, the things that just, the low hanging fruit is what I'll call
it.
Voice: Do those contracts expire relatively soon?
Mr. Lipkin: Yes. In fact their data processing contract, the whole contract was
only a one year contract and it has an escape clause if they sell the bank.
Voice: As far as the timing of the cost saves, at least 2/3 are pretty much
right away?
Mr. Lipkin: Yes.
Voice: How about the other third?
Mr. Lipkin: Within 12 months.
Voice: Great. That's all I had.
Operator: We have a question from the line of Sigmund Rolat, a private investor.
Voice: I own a number of shares and I also represent some friends whom I induced
into buying Merchants shares. I would like to explain to them just exactly how
you arrived at the figure of $20 for the value of each Merchant share?
Mr. Lipkin: What we did is took our earnings and we took their earnings. We took
the cost saves that we're going to be able to implement to their earnings. We
came up with a non-dilutive figure.
Voice: The figure I arrived at is closer to about $19.50. Also what happens if,
in the next, say, eight to twelve weeks, the value of Valley shares goes down?
Mr. Lipkin: Then it goes down. There's nothing we can do about the price of our
stock. We can't manipulate our stock. By the way sir, there will be a very
substantial increase in the dividend that you will be receiving.
Operator: We have a follow up question from the line of Kevin Szocik with KBW.
Voice: I did have one follow up there. I got cut off before. Again, you guys
have been fairly aggressive in the repurchase activity. Is there any problem or
any issue with tainted shares right now that you might have to do a tainted
share issuance?
Mr. Lipkin: No.
Voice: You're up to snuff as far as that is concerned. Just rescinding the buy
back going forward?
Mr. Lipkin: That's correct.
Operator: We have a follow up question from the line of Adam Barkstrom with Legg
Mason.
Voice: You mentioned implementation of ATM infrastructure over the seven
existing branches. Are you going to add additional ATMs or just seven?
Mr. Lipkin: Initially our goal is to put ATMs inside or outside through the wall
in their offices. Their offices are all located, as you know, in Manhattan.
They're all located in places where there is enormous street traffic back and
forth in front of their branches. We feel that the ATMs are just a natural. We
will obviously consider additional offsite locations as we do now for our own
institutions.
Voice: How meaningful is that cost-wise? Is it fairly immaterial?
Mr. Lipkin: On a marginal basis, our cost will be very nominal. The cost of the
unit, the cost of the tie line, the cost of running the system we already have
in place. We do have capacity. As I mentioned earlier we drive our own ATM
system. We have capacity in that.
Operator: We have a follow up question from the line of Roberta Probber with
Ryan, Beck.
Voice: You talked earlier about expanding into Rockland County. Do you see
expanding the Manhattan franchise at all?
Mr. Lipkin: Yes. We've had some discussions with their senior management already
about some locations that they feel would be viable for us to expand their
present structure.
Operator: There are no further questions. Please continue.
Mr. Lipkin: I want to thank everybody for tuning in today. I hope you share the
same excitement that we do. We really feel this is going to be a wonderful
opportunity for the shareholders of both institutions. Thank you for coming.
