UNITED STATES
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): July 31, 1998
BANKNORTH GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-18173 03-0321189
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
Banknorth Group, Inc.
300 Financial Plaza
P.O. Box 5420
Burlington, VT 05401-5420
(Address of principal executive offices)
Registrant's telephone number, including area code: (802) 658-9959
Not applicable
(Former name or former address, if changed since last report)
Item 5. Other Events
- ---------------------
On July 31, 1998, Banknorth Group, Inc. (the "Company" or "Banknorth")
entered into an Affiliation Agreement and Plan of Reorganization (the
"Affiliation Agreement") with Evergreen Bancorp, Inc. ("Evergreen"). Both the
Company and Evergreen are registered as bank holding companies under the
federal Bank Holding Company Act, as amended.
Under the terms of the Affiliation Agreement and a related Agreement and
Plan of Merger dated as of July 31, 1998 between the Company and Evergreen (the
"Merger Agreement"), Evergreen will be merged with and into the Company, with
shareholders of Evergreen receiving as merger consideration .90 shares of
Banknorth common stock for each whole share of Evergreen common stock, plus
cash in lieu of any fractional shares. Approximately 7.9 million shares of
Banknorth common stock will be issued in the transaction. It is expected that
the merger will be a tax-free reorganization under the Internal Revenue Code
and accounted for as a pooling-of-interests. Both Banknorth and Evergreen also
announced the recision of their existing stock repurchase programs.
Based on an average of the closing price of Banknorth common stock of
$36.84 per share for the five trading days preceding execution of the
Affiliation Agreement, the deal is valued at approximately $291.2 million and,
based on such share price, Evergreen shareholders would receive Banknorth
common stock having a market value of approximately $33.16 for each share of
Evergreen common stock converted in the merger. The price equates to 3.3 times
the tangible book value of Evergreen at June 30, 1998, and 22.7 times
Evergreen's 1999 earnings estimates of $1.46 per share. The transaction is
expected to enhance Banknorth's earnings in 1999.
Consummation of the merger is subject to a number of conditions,
including approval of the merger by the shareholders of the Company and
Evergreen, receipt of all requisite governmental approvals (including the
approval of the Board of Governors of the Federal Reserve System) and certain
other customary conditions.
As an inducement and condition to the Company's entering into the
Affiliation Agreement, Evergreen granted to the Company an option to purchase
up to 19.9% of Evergreen's issued and outstanding shares of common stock
(without giving effect to the shares issuable upon exercise of the option) on
certain terms and conditions specified in a Stock Option Agreement dated as of
July 31, 1998 between the companies. The option is exercisable only upon the
occurrence of certain events, including the acquisition by any person of
beneficial ownership of 25% or more of the Evergreen's outstanding common
stock, or agreement by Evergreen to engage in, or the recommendation of
Evergreen's Board of Directors that Evergreen's stockholders approve, any of
the following types of extraordinary corporate transactions: (1) a merger or
consolidation, or any similar transaction, involving Evergreen or any
significant subsidiary of Evergreen; (2) a purchase, lease or other acquisition
of all or a substantial portion of the assets of Evergreen or any significant
subsidiary of Evergreen, or (3) a purchase or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of securities
representing more than 25% of the voting power of Evergreen.
Total assets of Banknorth at June 30, 1998, were approximately $3.0
billion. On July 1, 1998, Banknorth announced an agreement to purchase for
cash, the Berkshire County, Massachusetts branch offices and related business
of BankBoston, N.A., including private banking relationships representing a
trust and investment management portfolio of approximately $1.0 billion. That
transaction is expected to close in the fourth quarter of 1998. After
completion of both the BankBoston and Evergreen transactions, total assets of
Banknorth will be approximately $4.3 billion.
The Evergreen acquisition, Banknorth's first in New York, is expected to
be completed by the end of 1998 or early in 1999, subject to receipt of
regulatory and shareholder approvals. Additional information about the
transaction is contained in the Company's press release, filed as Exhibit 99.1
to this Report and is incorporated herein by reference. The text of the
Affiliation Agreement, the Merger Agreement and the Stock Option Agreement,
were filed with the Commission on August 10, 1998 as Exhibits to the Company's
Schedule 13D relating to the Evergreen stock option.
A copy of the Company's presentation to investors, dated August 3, 1998,
regarding the merger is attached as Exhibit 99.2 to this Report and is
incorporated herein by reference.
The Exhibits to this Report contain forward-looking statements with
respect to the financial conditions, results of operations and businesses of
each of Banknorth and Evergreen and, assuming the consummation of the merger,
the combined company, including statements relating to the cost savings and
accretion to reported earnings that are expected to be realized from the
merger; the anticipated impact of the merger on revenues; and the restructuring
charges expected to be incurred in connection with the merger. These
forward-looking statements involve certain risks and uncertainties and the
Company wishes to caution readers not to place undue reliance on any
forward-looking statements. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among others, the following possibilities: expected cost savings from the
merger cannot be fully realized or realized within this expected timeframe;
revenues following the merger are lower than expected; competitive pressure on
the combined company increases significantly, including competitive pressures
resulting from increasing consolidation within the banking industry; failure to
comply with Year 2000 programming issues by certain customers or vendors of
critical systems or services; costs or difficulties related to the integration
of the businesses of the Company and Evergreen are greater than expected;
changes in the interest rate environment reduce interest margins; a downturn in
local, regional, or national economic conditions; changes in Generally
Accepted Accounting Principles or in applicable laws or regulations governing
the business in which the combined company would be engaged; and other factors
enumerated in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (Commission File No. 0-18173).
Such forward-looking statements speak only as of the date on which such
statements were made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which any such statement is made to reflect the occurrence of unanticipated
events.
The foregoing descriptions of and references to all of the
above-mentioned agreements and documents do not purport to be complete and are
qualified in their entirety by reference to the complete texts of such
documents filed or incorporated by reference as exhibits hereto.
Item 7. Financial Statements and Exhibits
- ------------------------------------------
(c) Exhibits
2.1 Affiliation Agreement and Plan of Reorganization,
dated as of July 31, 1998, between the Company and
Evergreen, incorporated by reference to Exhibit 1 of
Schedule 13D filed by the Company on August 10,
1998, relating to securities of Evergreen
2.2 Agreement and Plan of Merger, dated as of July 31,
1998, by and between the Company and Evergreen,
incorporated by reference to Exhibit 2 of Schedule
13D filed by the Company on August 10, 1998,
relating to securities of Evergreen.
10.1 Stock Option Agreement, dated as of July 31, 1998,
between the Company and Evergreen, incorporated by
reference from Exhibit 3 of Schedule 13D filed by
the Company on August 10, 1998, relating to
securities of Evergreen.
99.1 Press release dated Friday, July 31, 1998
99.2 Investor Presentation Materials dated Monday,
August 3, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 8-K to be signed on its behalf
by the undersigned hereunto duly authorized.
BANKNORTH GROUP, INC.
Dated: August 10, 1998 By: /s/ Thomas J. Pruitt
-----------------------------------
Thomas J. Pruitt
Executive Vice President and Chief
Financial Officer
EXHIBIT INDEX
-------------
Exhibit No. Description
2.1 Affiliation Agreement and Plan of Reorganization, dated as of
July 31, 1998, between the Company and Evergreen, incorporated
by reference to Exhibit 1 of Schedule 13D filed by the Company
on August 10, 1998, relating to securities of Evergreen.
2.2 Agreement and Plan of Merger, dated as of July 31, 1998, by and
between the Company and Evergreen, incorporated by reference to
Exhibit 2 of Schedule 13D filed by the Company on August 10,
1998, relating to securities of Evergreen.
10.1 Stock Option Agreement, dated as of July 31, 1998, between the
Company and Evergreen, incorporated by reference from Exhibit 3
of Schedule 13D filed by the Company on August 10, 1998,
relating to securities of Evergreen.
99.1 Press release dated Friday, July 31, 1998
99.2 Investor Presentation Materials dated Monday, August 3, 1998
Exhibit 99.1
[LOGO] Banknorth Group
News Release
300 Financial Plaza, P.O. Box 5420
Burlington, VT 05401
For Release: Friday, July 31, 1998, 9:00 a.m. EDT
Contact:
William H. Chadwick George W. Dougan Thomas J. Pruitt
President & CEO Chairman, President & CEO EVP & CFO
Banknorth Group, Inc. Evergreen Bancorp, Inc. Banknorth Group, Inc.
(802) 860-5560 (518) 792-1151 (802) 860- 5558
BANKNORTH GROUP AND EVERGREEN BANCORP
ANNOUNCE MERGER AGREEMENT
BURLINGTON, VT, July 31, 1998. William H. Chadwick, President and Chief
Executive Officer, of Banknorth Group, Inc. (NASDAQ-BKNG), and George W.
Dougan, Chairman, President and Chief Executive Officer of Evergreen
Bancorp, Inc. (NASDAQ-EVGN). today jointly announced that they have signed a
definitive merger agreement under which Evergreen will be merged into
Banknorth.
Under the terms of the merger agreement, shareholders of Evergreen
will receive .90 shares of Banknorth common stock for each whole share of
Evergreen common stock plus cash in lieu of any fractional shares.
Approximately 7.9 million shares of Banknorth common stock will be issued in
the transaction. The exchange will be tax free and accounted for as a
pooling of interests. Both Banknorth and Evergreen also announced the
recision of their existing stock repurchase programs.
Based on an average of the five preceding trading days closing price
of Banknorth common stock of $36.84 per share, the deal is valued at $291.2
million and Evergreen shareholders will receive $33.16 of Banknorth common
stock for each share of Evergreen common stock. The price equates to 3.3
times the tangible book value of Evergreen at June 30, 1998, and 22.7 times
Evergreen's 1999 earnings estimates of $1.46. The transaction is expected
to enhance Banknorth's earnings in 1999.
In making the announcement, Chadwick said, "This merger is consistent
with our strategic objectives of expanding into contiguous community banking
oriented markets, leveraging our capital infrastructure to enhance earnings,
strengthening fee income through the addition of significant trust assets
and providing an additional platform for further growth.
-MORE-
Banknorth and Evergreen To Merge
Page 2
Evergreen has a well-known reputation as a commercial bank and has
demonstrated a strong commitment to the communities it serves. They are
just like us in many ways and the fit is a natural. We are pleased to have
George Dougan and Evergreen Bank as part of the Banknorth team," he said.
"We considered several strategic alternatives for the future of
Evergreen", said George Dougan. "With Banknorth we have chosen a
partnership with a company whose style of banking, as well as historical
roots and traditions are very similar to ours. Banknorth's style and plan
achieve our goal of having the least amount of disruption in the communities
we serve. Evergreen Bank will continue to serve it's customers and grow the
franchise throughout our market area, while providing our shareholders with
continued earnings growth, a strong dividend and additional capital
appreciation potential." he said. Dougan will be named Vice Chairman of
Banknorth and a member of its Policy Group, in addition to his role as
President of Evergreen Bank. Two Evergreen board members, in addition to
Dougan, will be elected to Banknorth's board of directors. Evergreen Bank,
N.A. will continue to operate as a separate bank with its own board of
directors.
The agreement is subject to the approval of both Evergreen and
Banknorth shareholders, as well as the approval of regulators. It is
anticipated that the merger will be completed by the end of 1998 or early in
the first quarter of 1999. As part of the agreement, Evergreen gave
Banknorth an option to purchase 19.9 percent of its outstanding common stock
under certain circumstances.
Total assets of Banknorth at June 30, 1998, were $3.0 billion. On
July 1, 1998, Banknorth announced an agreement to purchase for cash, the
Berkshire County Massachusetts franchise, including its private banking
services that include an investment management portfolio of approximately
$1.0 billion, from BankBoston, N.A. The 10 branches in the Berkshire
franchise have approximately $285 million in deposits and $118.0 million in
loans. That transaction is expected to close in the fourth quarter of 1998.
After the completion of both the BankBoston and Evergreen transactions,
total assets of Banknorth will be approximately $4.3 billion.
A conference call on the acquisition announcement will be held at
10:00 a. m. EDT on Monday August 3, 1998. Interested parties should call 1-
800 553-0318.
-MORE-
Banknorth and Evergreen To Merge
Page 3
Banknorth Group, Inc., presently includes seven community banks,
Banknorth Mortgage Company, Inc. and The Stratevest Group, N.A., a trust and
management investment firm. The Company has offices in Massachusetts, New
Hampshire and Vermont.
Except for historical information contained herein, the matters
contained in this news release and other information contained in the
Company's SEC filings, may express "forward- looking statements" that
involve risk and uncertainties, including statements concerning future
events or performance and assumptions and other statements that are other
than statements of historical facts. The Company wishes to caution readers
not to place undue reliance on any forward-looking statements, which speak
only as of the date made. Readers are advised that various factors,
including but not limited to---changes in laws, regulations or Generally
Accepted Accounting Principles; the Company's competitive position within
its market area of increasing consolidation within the banking industry;
certain customers and vendors of critical systems or services failing to
comply with year 2000 programming issues; unforeseen changes in interest
rates; any unforeseen downturns in the local, regional or nation economies-
- --could cause the Company's actual results or circumstances for future
periods to differ materially from those anticipated or projected.
Banknorth does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions that may be made
to any forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.
Exhibit 99.2
Banknorth Group, Inc.
&
Evergreen Bancorp, Inc.
Synopsis of Acquisition
August 3, 1998
These investor materials contain forward-looking statements that involve
risk and uncertainty. It should be noted that a variety of factors could
cause the combined company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in
the combined company's forward-looking statements.
The risks and uncertainties that may affect the operations,
performance, development, growth projections and results of the combined
company's business include, but are not limited to, the growth of the
economy, interest rate movements, timely development by the combined company
of technology enhancements for its products and operating systems, the
impact of competitive products, services and pricing, customer based
requirements, Congressional legislation, acquisition cost savings and
revenue enhancements and similar matters. Readers of this report 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, accordingly, may differ materially from management
expectations.
Strategic Fit
(Map of both banks area branch locations)
Description of Evergreen Bancorp
(EVGN)
* One-bank holding company headquartered in Glens Falls, NY. Its
principal subsidiary, Evergreen Bank, N.A., operates 28 banking
locations throughout the Glens Falls, Plattsburgh and Capital regions.
* A summary of the bank's balance sheet and earnings performance as of
June 30, 1998 is as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Total Assets: $1,067,196
Loans, net: 686,525
Securities: 321,332
Deposits: 924,955
Total Equity: 87,627
Equity to Assets: 8.21%
Annualized Earnings for the 6 months ended: 11,836
Annualized ROE: 13.62%
</TABLE>
Strong NY Market Share and Demographic Trends
Deposit Data & Market Share Information is as of June 19, 1997
Source: SNL Securities, L.P. & Claritas
<TABLE>
<CAPTION>
Average Household Income Clinton Warren Washington
<S> <C> <C> <C>
1997 $43,626 $47,374 $39,876
Projected 2002 $54,018 $55,622 $45,893
Percent Change 23.82% 17.41% 15.09%
EVGN Market Share 17.58% 33.46% 44.11%
EVGN Rank by County 3 2 1
</TABLE>
Transaction Benefits
* Strategic:
* Creates a regional commercial bank with estimated assets over $4.2
billion and approximately an $870mm market capitalization
* Expands core market area and creates critical mass in eastern New
York with a strong local presence
* Enhances ability to compete and widens product range through a
broadened customer base with similar demographics
* Adds approximately $550 million of additional trust assets
* Provides an additional platform for further growth
* Financial:
* Accretive to earnings
* Enhances capital
* Increases liquidity
* Identified cost savings of approximately $9 million
* Revenue enhancements and/or deployment of excess
capital/incremental cash will further enhance financial benefits
Transaction Description - Term Sheet
Structure: EVGN will be merged with BKNG and Evergreen
Bank, N.A., will be run as a separate subsidiary.
Exchange Ratio: Fixed exchange ratio of .90 shares of BKNG for
each EVGN share
Value: EVGN shareholders receive $33.16, based on
BKNG's 5-day average closing stock price of
$36.83 through 7/30/98. The aggregate offer is
approximately $291 million.
Accounting/Tax Treatment: Pooling of interests / tax free exchange
Stock Purchase Option: 19.9% of EVGN's shares outstanding
Expected Closing: Fourth quarter 1998 / 1st quarter 1999
Strong Balance Sheet Composition
Estimated June 30, 1998 Balance Sheets
($ in millions)
<TABLE>
<CAPTION>
Pro Forma Estimated
BKNG(1) EVGN Pro Forma
<S> <C> <C> <C>
Assets $3,168 $1,067 $4,236
Loans $2,135 $ 687 $2,822
Investments $ 741 $ 321 $1,063
Deposits $2,548 $ 925 $3,472
Borrowings $ 333 $ 36 $ 369
Tangible Capital $ 184 $ 88 $ 271
App. Market Capitalization $ 580 $ 291 $ 871
Borrowings/Assets 10.52% 3.37% 8.72%
Tangible Capital/Assets 5.79% 8.21% 6.40%
LLR/Loans 1.38% 1.84% 1.48%
<FN>
<F1> BKNG balance sheet items include the estimated impact of the pending
branch acquisition. On July 1, 1998, BKNG announced the acquisition of
10 BankBoston branches with approximately $285 million of deposits,
$118 million of loans and $1 billion of trust assets for a premium of
approximately $52.5 million.
</FN>
</TABLE>
Accretive to BKNG Projected Earnings(1)
($ in millions, except for per share data)
<TABLE>
<CAPTION>
Est. 1999
<S> <C>
BKNG Estimated Net Income ($2.19)(1) $34.40
EVGN Estimated Net Income ($1.46)(1) 13.1
Total Estimated Net Income 47.5
After-Tax Cost Savings ($9 Pre-Tax) 6.1
After-Tax Earnings on Incremental Cash/Capital 0
Revenue Enhancements 0
Pro Forma Net Income $53.60
EVGN Estimated FD Shares(2) 9.0
BKNG Estimated FD Shares(2) 15.7
Exchange Ratio .9
Pro Forma Estimated FD Shares 23.8
BKNG Stand Alone EPS $ 2.19
BKNG Pro Forma EPS $ 2.25
Accretion 2.84%
<FN>
<F1> Mean of I/B/E/S analyst projections and excludes the effect of one-time
restructuring charge anticipated in the 4th quarter of 1998.
<F2> Weighted Average diluted shares outstanding for the six (6) months ended
June 30, 1998. Shares are illustrated in millions.
</FN>
</TABLE>
Estimated Expense Reductions
($ in millions)
* EVGN's Ann. Last 6 Months Total Expense Base: $30.9 (1)
* EVGN's Projected 1999 Total Expense Base: $32.5 (2)
Estimated Efficiencies:
-----------------------
Salaries & Benefits $ 5.8
Occupancy & Equipment $ 1.8
Other $ 1.4
-----
Total $ 9.0
-----
Percentage of 1999 Projected Base 27.6%
* Estimated Pre-tax Merger and Restructuring Charges of $16mm
(1) Total other expenses for the 6 months ended June 30, 1998 were $15.483
million.
(2) Annualized last 6 months ($30.9) with an estimated 5% growth rate in
1999.
Revenue Enhancement Opportunities
* Trust services
* Expansion of small business lending
* Expansion of automobile leasing & indirect
* Cash management services
* Expanded legal lending limit
* Ability to leverage capital
Incremental Earnings Potential of Excess Capital
($ in millions except per share information)
<TABLE>
<CAPTION>
BKNG
Stand Alone Pro Forma
<S> <C> <C>
Total Assets $3,168 $4,236
Tangible Capital $ 184 $ 271
Tangible Capital/Assets 5.79% 6.40%
Capital needed to maintain a TC/A ratio of 6.00%: $ 254
Excess capital: $ 17
Assumed return on excess capital: 12%
Incremental earnings impact: $2,040
Incremental EPS pickup: $ 0.09
</TABLE>
