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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): February 13, 1997
Portsmouth Bank Shares, Inc.
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(Exact Name of Registrant as Specified in its Charter)
New Hampshire
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(State or Other Jurisdiction of Incorporation)
0-16510 02-0417778
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(Commission File Number) (IRS Employer Identification No.)
333 State Street, Portsmouth, New Hampshire 03801
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(Address of principal executive offices) (Zip Code)
(603) 436-6630
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Registrant's Telephone Number, Including Area Code
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
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On February 13, 1997, Portsmouth Bank Shares, Inc., a New Hampshire
corporation ("Portsmouth"), entered into an Agreement and Plan of Reorganization
(the "Acquisition Agreement") by and among Portsmouth, Portsmouth's wholly owned
subsidiary Portsmouth Savings Bank, CFX Corporation ("CFX") and CFX's wholly
owned subsidiary CFX Bank. The Acquisition Agreement provides that CFX will
acquire all of the outstanding stock of Portsmouth pursuant to a vote of
Portsmouth's stockholders. It is expected that Portsmouth will then merge with
and into CFX and that Portsmouth Savings Bank will merge with and into CFX Bank
and become a division of CFX Bank.
In connection with the Acquisition, each outstanding share of common
stock, $.10 par value per share, of Portsmouth ("Portsmouth Common Stock") will
be converted into .95 shares of common stock, $.66 2/3 par value per share, of
CFX ("CFX Common Stock") if the average closing price per share of CFX Common
Stock on the American Stock Exchange during the 10 trading-day period ending
immediately prior to the date on which the last regulatory approval required in
connection with the Acquisition is received (the "Average CFX Price"), exceeds
$17.375. If the Average CFX Price is equal to or less than $17.375 but is
greater than $15.70, the exchange ratio per share of Portsmouth Common Stock
will be the quotient obtained by dividing $16.50 by the Average CFX Price. If
the Average CFX Price is equal to or less than $15.70, the exchange ratio per
share of Portsmouth Common Stock will be 1.05. If the Average CFX price is equal
to or less than $14.20, Portsmouth may terminate the Acquisition unless CFX
agrees to issue additional shares of CFX Common Stock such that the adjusted
exchange ratio per share of Portsmouth Common Stock is equal to the quotient
obtained by dividing $14.91 by the Average CFX Price.
The foregoing dollar amounts and exchange ratios are subject to
automatic adjustment in the event that Portsmouth declares and pays any stock
dividends after February 13, 1997, so that the aggregate amount of CFX Common
Stock to be distributed in connection with the Acquisition will not be affected
by any such stock dividends.
If the Average CFX Price were to be equal to $18.50, the closing price
of CFX Common Stock on February 12, 1997, the aggregate consideration to be paid
in connection with the Acquisition would have a value of approximately $106
million, excluding the value of options to acquire CFX Common Stock which would
be substituted for outstanding employee stock options of Portsmouth in
accordance with a formula set forth in the Acquisition Agreement.
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The Acquisition is intended to constitute a tax-free reorganization,
and no gain or loss is expected to be recognized by CFX, Portsmouth or CFX Bank.
The Acquisition will be accounted for by the pooling-of-interests method of
accounting.
The consummation of the Acquisition and the transactions contemplated
by the Acquisition Agreement are subject to certain conditions customary in
transactions of this nature, including, among others, approval by the
stockholders of each of CFX and Portsmouth and receipt of all necessary
regulatory approvals. No assurance can be given that the Acquisition will be
consummated. Each party also has the right to terminate the Acquisition
Agreement under certain customary circumstances, including failure to
consummate the Acquisition by February 13, 1998 (or, in certain circumstances,
May 13, 1998).
In conjunction with the parties' signing of the Acquisition Agreement,
Portsmouth granted CFX an option, exercisable under certain conditions, to
purchase up to 1,142,000 shares of Portsmouth Common Stock at $15.75 per share
each, subject to adjustment in certain events.
Three of Portsmouth's Directors, including Portsmouth's chairman, who
currently hold in the aggregate approximately 4% of the currently outstanding
shares of Portsmouth Common Stock, have agreed in a separate letter agreement to
vote all of their shares in favor of the Acquisition and against any other
competing transaction.
Certain additional information regarding the Acquisition is contained
in Portsmouth's and CFX's joint press release dated February 13, 1997, included
as an exhibit hereto and incorporated herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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(c) Exhibits.
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See Index to Exhibits attached hereto.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
PORTSMOUTH BANK SHARES, INC.
By: /s/ Harry R. Hart
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Harry R. Hart, President and Chief
Executive Officer
Date: February 27, 1997
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INDEX TO EXHIBITS
Exhibit
Number
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99.1 Press Release of Portsmouth Bank Shares, Inc. and CFX Corporation
dated February 13, 1997.
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CFX CORPORATION
TO ACQUIRE
PORTSMOUTH BANK SHARES, INC.
Keene, N.H., February 13, 1997 - CFX Corporation (AMEX: CFX),
headquartered in Keene, New Hampshire and Portsmouth Bank Shares, Inc., (NASDAQ:
POBS), headquartered in Portsmouth, New Hampshire, announced today that they
have signed a definitive agreement under which CFX will acquire Portsmouth and
Portsmouth Savings Bank, Portsmouth's bank subsidiary.
Subsequent to the effective date of the merger, Portsmouth Savings Bank
will be merged into and operate as the Portsmouth Savings Division of CFX's New
Hampshire banking subsidiary, CFX Bank.
Pursuant to the definitive agreement, each outstanding share of
Portsmouth Common Stock will be converted into .95 share of CFX Common Stock. If
the average price of CFX Common Stock for the ten trading days preceding the
last regulatory approval required for the transaction is below $15.70, the
exchange ratio becomes 1.05 shares, and the exchange ratio floats between .95
and 1.05 shares if the average price of CFX Common Stock is between $17.375 and
$15.70. Portsmouth may terminate the agreement if the average price of CFX
Common Stock is below $14.20 per share unless CFX agrees to increase the
exchange ratio.
Three Portsmouth Directors will join the CFX Board and two will become
Directors of CFX Bank. The transaction is tax free to the shareholders of
Portsmouth and is subject to regulatory approval and the approval of both CFX's
and Portsmouth's shareholders. It is anticipated that the transaction will be
accounted for by the pooling-of-interests method of accounting.
Based on the closing price of CFX Common Stock on February 12, 1997 of
$18.50, the indicated value of the transaction would be $17.58 per Portsmouth
share, for a total aggregate consideration of approximately $106 million. The
agreement also provides CFX with an option to acquire up to 19.9% of the
outstanding shares of Portsmouth Common Stock under certain circumstances.
In announcing the transaction, Peter J. Baxter, President and Chief
Executive Officer of CFX Corporation stated, "Portsmouth Savings Bank is a
strong community bank located in the seacoast region of Rockingham County, one
of the most attractive banking markets in the state. Increased penetration into
higher growth markets has been a strategic objection of CFX and Portsmouth is a
natural extension of our current banking system. We look forward to serving the
customers and communities of Portsmouth Savings by providing the same level of
personal service to customers that Portsmouth has so effectively delivered over
the years."
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Mr. Baxter added, "CFX plans to add significantly to Portsmouth's asset
base upon completion of the acquisition. The core deposit base, strong capital
position, and highly liquid asset structure at Portsmouth will allow CFX to
continue to generate earning assets at the pace we have seen in recent years.
Additionally, we look forward to capitalizing on the attractive economic
conditions in New Hampshire's seacoast region by integrating our investment and
trust services, mortgage banking, and commercial banking services with the
strong community presence Portsmouth Savings Bank has developed since its
inception in 1823.
"We anticipate that after efficiencies resulting from consolidation,
and after certain balance sheet restructuring, the transaction will be accretive
to both earnings per share and book value per share, making the acquisition
beneficial to shareholders of both CFX Corporation and Portsmouth Bank Shares,
Inc. Upon consummation of the merger, CFX will take a special charge of
approximately $2.9 million to earnings for one-time costs of the transaction."
Robert W. Simpson, Chairman of the Board of Directors of Portsmouth
Bank Shares, Inc. said, "We are pleased to affiliate with a strong, well-managed
and locally controlled financial institution. The CFX organization allows our
customers access to a greatly expanded menu of financial services and resources.
Our strong heritage as a community bank blends very well with CFX's strong
banking heritage."
CFX Corporation is a multi-bank holding company with total assets of
$1.6 billion as of December 31, 1996. The Company's three banking subsidiaries
are CFX Bank, headquartered in Keene, New Hampshire, Orange Savings Bank,
headquartered in Orange, Massachusetts, and The Safety Fund National Bank,
headquartered in Fitchburg, Massachusetts. CFX Mortgage, Inc., CFX Bank's
mortgage banking subsidiary, services approximately $765 million in mortgage
loans for others. In addition, CFX Funding L.L.C., a 51% owned subsidiary of CFX
Bank that engages in the facilitation of lease financing and rated
securitizations, now services over $100 million in leases for others. The
Company operates 42 full service offices, 2 loan production offices, and 68
automated teller and remote service banking locations in New Hampshire and
central Massachusetts, and operates a trust division with $370 million in assets
under management.
