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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
October 27, 1997
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(Date of earliest event reported)
Peoples Heritage Financial Group, Inc.
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(Exact name of registrant as specified in its charter)
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<S> <C>
Maine 0-16947 01-0437984
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
P.O. Box 9540, One Portland Square, Portland, Maine 04112-9540
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(Address of principal executive offices) (Zip Code)
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(207) 761-8500
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former
fiscal year, if changed since last report)
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ITEM 5. OTHER EVENTS
On October 27, 1997, Peoples Heritage Financial Group, Inc. ("PHFG")
announced that it and CFX Corporation (the "Company") had entered into an
Agreement and Plan of Merger, dated as of October 27, 1997 (the "Agreement"),
which sets forth the terms and conditions pursuant to which the Company would
be merged with and into PHFG (the "Merger"). The Agreement provides, among
other things, that as a result of the Merger, each outstanding share of common
stock of the Company (subject to certain exceptions) will be converted into the
right to receive .667 newly-issued shares of PHFG's common stock. Consummation
of the Merger is subject to a number of conditions, including, but not limited
to, (i) the approval of the Agreement and the Merger by the shareholders of
both PHFG and the Company and (ii) the receipt of certain regulatory approvals.
In connection with the Agreement, PHFG and the Company entered into Stock
Option Agreements, dated as of October 27, 1997, pursuant to which the Company
granted PHFG an option (the "Company Option") to purchase up to 19.9% (subject
to adjustments set forth therein) of the Company's outstanding shares of common
stock at a purchase price of $22.69 per share and PHFG granted the Company an
option (the "PHFG Option") to purchase up to 10.0% (subject to adjustments set
forth therein) of PHFG's outstanding shares of common stock at a purchase price
of $43.13 per share. The Company Option and the PHFG Option will become
exercisable upon the occurrence of certain events, as specified in the
applicable Stock Option Agreement, none of which has occurred as of October 27,
1997.
The press release issued by PHFG and the Company with respect to the
announcement of the transaction described herein is attached hereto as Exhibit
99.1 and is hereby incorporated herein by reference in its entirety. Also
attached as Exhibit 99.2 and incorporated herein by reference are certain
forward-looking statements to be made by PHFG in connection with a presentation
to be given by PHFG to investment analysts on October 27, 1997.
The press release and the portions of the analyst presentation
incorporated herein by reference contain forward-looking statements with
respect to the financial condition, results of operations and business of PHFG
upon consummation of the Merger, including statements relating to: (a) the
estimated cost savings and accretion to reported earnings that will be realized
from the Merger; (b) the estimated impact on revenues of the Merger, and (c)
the restructuring charges expected to be incurred in connection with the
Merger. These forward-looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ materially from
those contemplated by such forward-looking statements include, among others,
the following possibilities: (1) estimated cost savings from the Merger cannot
be fully realized within the expected time frame; (2) revenues following the
Merger are lower than expected; (3) competitive pressure among depository
institutions increases significantly; (4) costs or difficulties related to the
integration of the businesses of PHFG and the Company are greater than
expected; (5) changes in the interest rate environment reduce interest margins;
(6) general economic conditions, either nationally or in the markets in which
PHFG will be doing business, are less favorable than expected; or (7)
legislation or changes in regulatory requirements adversely affect the
businesses in which PHFG would be engaged.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Not applicable.
(b) Not applicable.
(c) The following exhibits are included with this Report:
Exhibit 99.1 Press Release, dated October 27, 1997
Exhibit 99.2 Portions of Analysts Presentation
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SIGNATURES
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 thereunto duly authorized.
PEOPLES HERITAGE FINANCIAL GROUP, INC.
By: /s/ Peter J. Verrill
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Name: Peter J. Verrill
Title: Executive Vice President,
Chief Operating Officer, Chief
Financial Officer and Treasurer
Date: October 27, 1997
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Exhibit 99.1
PEOPLES HERITAGE FINANCIAL GROUP, INC. NEWS RELEASE
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION, CONTACT
AT PEOPLES HERITAGE FINANCIAL GROUP:
BRIAN ARSENAULT, VICE PRESIDENT, CORPORATE COMMUNICATIONS
(207) 761-8517
AT CFX CORPORATION:
MARK A. GAVIN, CHIEF OPERATING OFFICER
(603) 355-8604
PEOPLES HERITAGE FINANCIAL GROUP, INC. TO ACQUIRE CFX CORPORATION
AND CREATE NEW HAMPSHIRE'S LARGEST BANK
STRONG MASSACHUSETTS FRANCHISE ALSO CREATED
Portland, Maine, October 27, 1997 -- Peoples Heritage Financial Group,
Inc. (NASDAQ: PHBK), a multi-bank and financial services holding company
headquartered in Portland, Maine, has reached agreement to acquire Keene, New
Hampshire based CFX Corporation (AMEX: CFX) and create New England's fourth
largest banking company.
Under terms of the agreement, each share of common stock of CFX will
be converted into 0.667 shares of Peoples Heritage common stock. Approximately
16 million shares of Peoples Heritage common stock will be issued in the
transaction, which will be a tax-free reorganization and accounted for as a
pooling-of-interests. Following the merger, Peoples Heritage will have
approximately $9.4 billion of assets, $6.6 billion of deposits and $696.8
million of shareholders' equity, and a pro forma market capitalization of $1.9
billion.
CFX Corporation's New Hampshire Bank, CFX Bank, including the
recently-merged Portsmouth Savings Bank, Concord Savings Bank and Centerpoint
Bank, will be merged into Peoples Heritage's New Hampshire Bank, Bank of New
Hampshire. The resultant Bank of New Hampshire will be the state's largest
bank with $4.4 billion in assets and will have the state's largest deposit
market share.
The Massachusetts banking subsidiaries of CFX Corporation, Orange
Savings Bank headquartered in Orange, Massachusetts and The Safety Fund
National Bank headquartered in Fitchburg, Massachusetts, will be merged into
Peoples Heritage's Massachusetts banking subsidiary, Family Bank.
Based on a closing share price of Peoples Heritage common stock of
$43.13 on October 24, 1997, the transaction would be valued at approximately
$703 million and CFX shareholders would receive $28.76 in Peoples Heritage
common stock for each share of CFX
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common stock. This price equates to 2.8 times CFX Corporation's book value at
September 30, 1997 and 18 times its estimated earnings in 1998.
"We have now created a New England banking and financial services
powerhouse," said William J. Ryan, Chairman, President and Chief Executive
Officer of Peoples Heritage. "We become the number one bank in New Hampshire,
after having recently grown to nearly the number one position in Maine, and our
Massachusetts franchise is significantly enhanced."
"We are extremely pleased to join Peoples Heritage," said Peter J.
Baxter, President and Chief Executive Officer of CFX Corporation, who will
become Vice Chairman and Chief Operating Officer of Peoples Heritage upon
completion of the acquisition. "This is the coming together of two great
community banking franchises, both with customer driven styles of doing
business. Five CFX directors will join the Peoples Heritage Board."
The agreement is subject to approval by shareholders of both companies
and by regulatory authorities. It is anticipated that the transaction will
close by mid-1998.
As part of the agreement, CFX gave Peoples Heritage an option to
purchase 19.9% of its outstanding common stock under certain circumstances and
Peoples Heritage gave CFX an option to purchase 10.0% of its outstanding common
stock under certain circumstances.
Peoples Heritage plans an analyst conference call at 11:30 a.m., EDT,
today to elaborate on the strategic rationale and financial implications of the
acquisition. To participate in the conference call, dial 1-800-289-0493.
This press release contains certain forward-looking statements with
respect to the financial condition, results of operations and business of
Peoples Heritage following the consummation of the merger that are subject to
various factors which could cause actual results to differ materially from such
projections or estimates. Such factors include, but are not limited to, the
possibility that anticipated cost savings and revenue enhancements might not be
realized and that adverse general economic conditions or an adverse interest
rate environment could develop. Peoples Heritage's current report on Form 8-K
filed on or about October 27, 1997 discloses more fully these factors.
Peoples Heritage Financial Group has $6.5 billion in assets and
operates three banking subsidiaries: Peoples Heritage Bank with 74 banking
offices in Maine, Bank of New Hampshire with 46 banking offices in New
Hampshire and Family Bank with 17 banking offices in Massachusetts and five in
southern New Hampshire.
CFX Corporation has $2.8 billion in assets and operates three banking
subsidiaries: CFX Bank in New Hampshire and Orange Savings Bank and The Safety
Fund National Bank in Massachusetts with a total of 58 banking offices.
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Exhibit 99.2
PRO FORMA HIGHLIGHTS
September 30, 1997
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<CAPTION>
Pro Forma
($ in millions, except per share amounts) PHBK CFX** Combined
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Assets $6,554* $2,821 $9,375
Total loans $4,273* $1,913 $6,186
Loan loss reserve $ 70* $ 21 $ 92
Deposits $4,623* $1,936 $6,558
Capital $ 451* $ 246 $ 685
Intangible assets $ 117* $ 9 $ 126
Leverage ratio 7.35%* 8.38% 7.68%
Stated book value $16.42 $10.25 $15.75
Tangible book value $12.15 $ 9.88 $12.85
Market capitalization $1,034 $ 527 $1,876
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* Includes the effect of the acquisition of Atlantic Bancorp on October
1, 1997.
** On a pooling basis, excluding merger costs.
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Based on estimate of standard analyst model on mean Wall Street estimates.
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Estimated
(in thousands except per share amounts) Pro Forma 1998 1999
Shares Earnings(a) Earnings
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PHBK EPS $ 2.97 $ 3.30
PHBK base net income 27,500 $ 81,675 $ 90,750
CFX base net income 24,003 $ 38,083 $ 42,844
Cost savings after tax(b) $ 7,972 $ 12,555
Revenue enhancements after tax:
CFX margin improvement $ 3,500
Leveraging of excess capital $ 1,600
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Pro forma revenue growth $ 5,100
Total 43,974 $127,730 $151,249
Pro forma EPS $2.91 $3.43
Accretion (Dilution) $(.06) $.13
Accretion (Dilution) (2%) 4%
Net earnings based on annualized
cost savings $136,716
Pro forma EPS $3.00
Accretion - $ $.03
Accretion - % 1%
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(a) Excludes the effect of a one-time merger and restructuring charge
anticipated in the first quarter of 1998, which is estimated at $12.0
million on an after-tax basis.
(b) Assumes cost savings are phased in 67% and 100% in 1998 and 1999,
respectively.
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