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
June 1, 1999
(Date of earliest event reported)
Banknorth Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 000-18173 03-0321189
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
300 Financial Plaza, PO Box 5420, Burlington, Vermont 05401-5420
(Address of principal executive offices) (Zip Code)
(802) 658-9959
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Item 5. Other Events
On June 2, 1999, Banknorth Group, Inc. (the "Company") announced that
it and Peoples Heritage Financial Group, Inc. ("PHFG") had entered into an
Agreement and Plan of Merger, dated as of June 1, 1999 (the "Agreement"),
which sets forth the terms and conditions pursuant to which the Company
would be merged with and into PHFG (the "Merger") and PHFG would change its
name to "Banknorth Group, Inc." 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 1.825 shares of PHFG's common stock, plus cash in lieu of any
fractional share interest. Consummation of the Merger is subject to a
number of conditions, including (i) the approval of the Agreement and the
Merger by the shareholders of the Company and PHFG, (ii) the receipt of
requisite regulatory approvals, (iii) receipt by the parties of an opinion
of counsel as to certain tax consequences of the Merger, (v) receipt by the
parties of letters from their independent public accountants stating their
opinion that the Merger shall qualify for pooling-of-interests accounting
treatment and (v) satisfaction of certain other conditions.
In connection with the Agreement, PHFG and the Company entered into a
Stock Option Agreement, dated as of June 1, 1999 (the "Company Stock Option
Agreement"), pursuant to which the Company granted PHFG an option (the
"Company Option") to purchase up to 4,621,085 shares of the Company's common
stock (subject to adjustment as set forth therein), which represents 19.9%
of the Company's outstanding shares of common stock, at a purchase price of
$26.80 per share (subject to adjustment as set forth therein). The Company
Option will become exercisable upon the occurrence of certain events, as
specified in the Company Stock Option Agreement, none of which has occurred
as of the date of this Report.
In connection with the Agreement, PHFG and the Company also entered
into a Stock Option Agreement, dated as of June 1, 1999 (the "PHFG Stock
Option Agreement"), pursuant to which PHFG granted the Company an option
(the "PHFG Option") to purchase up to 20,820,000 shares of PHFG's common
stock (subject to adjustment as set forth therein), which represents 19.9%
of PHFG's outstanding shares of common stock, at a purchase price of $19.20
per share (subject to adjustment as set forth therein). The PHFG Option
will become exercisable upon the occurrence of certain events, as specified
in the PHFG Stock Option Agreement, none of which has occurred as of the
date of this Report.
In connection with the Agreement, (i) the Company adopted an amendment
to its Rights Plan, dated as of June 1, 1999, which generally provides that
the Agreement and the Company Stock Option Agreement and the transactions
contemplated thereby shall have no consequences for purposes of such Rights
Plan, and (ii) PHFG adopted a similar amendment to its Rights Plan with
respect to the Agreement and the PHFG Stock Option Agreement.
The press release issued by PHFG and the Company with respect to the
announcement of the proposed Merger is filed as Exhibit 99.1 to this Report
and is incorporated by reference into this Report in its entirety.
The press release incorporated herein by reference contains forward-
looking statements with respect to the financial condition, results of
operations and business of the surviving corporation upon consummation of
the Merger, including statements relating to: (a) the estimated cost
savings that will be realized from the Merger; (b) the estimated impact on
results of operations 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, or 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 the surviving corporation will be doing business, are
less favorable than expected; or (7) legislation or changes in regulatory
requirements adversely affect the businesses in which the surviving entity
would be engaged.
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 2.1 Agreement and Plan of Merger, dated as of June 1,
1999, between PHFG and the Company(1)
Exhibit 10.1 Stock Option Agreement, dated as of June 1, 1999,
between PHFG (as grantee) and the Company (as
issuer)(1)
Exhibit 10.2 Stock Option Agreement, dated as of June 1, 1999,
between PHFG (as issuer) and the Company (as
grantee)(1)
Exhibit 10.3 Form of letter agreement between affiliates of the
Company and PHFG(1)
Exhibit 10.4 Form of letter agreement between affiliates of
PHFG and PHFG(1)
Exhibit 99.1 Press Release, dated June 2, 1999
Exhibit 99.2 Amendment, dated as of June 1, 1999, to the Rights
Agreement, dated as of November 27, 1990 and
amended and restated as of September 4, 1998,
between the Company and Registrar and Transfer
Company, as Rights Agent.(1)
Exhibit 99.3 Amendment, dated as of June 1, 1999, to the Rights
Agreement, dated as of September 12, 1989, between
PHFG and American Stock Transfer & Trust Company,
as Rights Agent(1)
(1) To be filed by amendment.
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.
BANKNORTH GROUP, INC.
By: /s/ Thomas J. Pruitt
--------------------------
Name: Thomas J. Pruitt
Title: Executive Vice President and
Chief Financial Officer
Date: June 3, 1999
EXHIBIT 99.1
For Immediate Release
For Further Information:
At Peoples Heritage, contact: At Banknorth, contact:
Brian Arsenault, SVP, Corp. Communications William H. Chadwick, President
and CEO
(207) 761-8517 (802) 860-5560
Peoples Heritage to Acquire Banknorth
and Create a $17 Billion Banking Company
Extends Franchise to Vermont and Upstate New York
Banknorth Name to be Retained
(Conference call re this announcement at 2 p.m., eastern time, today, June
2, 1999. Conference call telephone number: 1-800-946-0742, confirmation
code 704970)
Portland, Maine, June 2, 1999 - Peoples Heritage Financial Group, Inc.
(NASDAQ:PHBK) announced today that it has reached a definitive agreement
to acquire Banknorth Group, Inc. (NASDAQ:BKNG) in a transaction valued at
$780.7 million. The acquisition will create a $17 billion multi-state
banking and financial services company.
The transaction will provide the Company its initial entry into Vermont
and Upstate New York while expanding its presence in Massachusetts and New
Hampshire. Peoples Heritage, headquartered in Portland, Maine, currently
has the largest bank deposit market share in Maine and New Hampshire, the
eighth largest market share in Massachusetts and a bank in north-central
Connecticut.
William J. Ryan, Peoples Heritage Chairman, President and Chief Executive
Officer, said that his Company will take on the Banknorth name.
"Our new name will more clearly represent our presence in every New
England state except Rhode Island and our entry into Upstate New York,"
said Mr. Ryan. "We also hope to send the market a clear message that we
are truly a commercial banking company and not a traditional thrift."
"Geographically, we are executing a natural, contiguous extension of our
franchise which makes us the dominant community banking franchise in
virtually all of New England."
Under the terms of the definitive agreement, shareholders of Banknorth
will receive 1.825 shares of Peoples Heritage common stock for each whole
share of Banknorth common stock plus cash in lieu of any fractional share
interest. Approximately 42.9 million shares of Peoples Heritage stock
will be issued in the transaction, including shares issuable upon the
exercise of substitute stock options. The exchange will be tax free and
accounted for as a pooling of interests.
Based on a closing price of $18.00 per share of Peoples Heritage on June
1, 1999, the cash equivalent value of the deal is $32.85 for each share of
Banknorth stock. The price equates to 2.35 times the book value of
Banknorth at March 31, 1999 and 14.6 times estimated 1999 earnings per
share.
Under the terms of the definitive agreement, a 21-member Board of
Directors of the resulting company will include six of the current
directors of Banknorth.
"We are pleased to achieve this affiliation with Peoples Heritage which,
we believe, serves the long-term interests of our shareholders, and
affirms our commitment to serving the banking needs of customers
throughout our market area -- from first-time homeowners to small
businesses, from families buying and insuring an automobile to those
customers planning for retirement," said William H. Chadwick, President
and Chief Executive Officer of Banknorth. "As giant banks continue to
emerge, it is important that institutions with the community banking style
of the "new" Banknorth be here to serve 'Main Street' New England and
Upstate New York.
The agreement is subject to the approval of the shareholders of both
companies and requisite regulatory approvals. It is expected that the
transaction will be closed by year-end. The operational integration of
the two companies is expected to be completed during the second quarter of
2000. As part of the agreement, each party provided the other an option
to purchase 19.9 percent of its outstanding common stock under certain
circumstances. Due diligence is to be completed by both parties within a
week.
The transaction is expected to be accretive to earnings during the first
full 12 months following the operational integration. For calendar year
2000, the transaction is expected to be 4 cents dilutive because
anticipated cost savings will be realized for only about half the year
while the additional shares will be issued for the full year. In 2001,
the transaction is estimated to be accretive by 3 cents per share and in
2002 by 4 cents per share.
Peoples Heritage had $12.6 billion in assets at March 31, 1999. It
operates Peoples Heritage Bank in Maine, Bank of New Hampshire throughout
the state, Family/SIS Bank in Massachusetts and Glastonbury Bank & Trust
in Connecticut. The Company also operates subsidiaries in insurance,
investments, trust services, mortgage banking and equipment leasing; and
has 221 banking offices and 287 ATMs.
Banknorth Group had total assets of $4.4 billion at March 31, 1999. It
operates eight community banks, The Stratevest Group, a $4.0 billion
investment management company, and Banknorth Mortgage Company, Inc. It
operates 101 banking offices and 145 ATMs in Massachusetts, New Hampshire,
Vermont, and Upstate New York.
(This press release contains certain forward-looking statements with respect
to the financial condition, results of operations and business of the
Company following the completion of the acquisition 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. A current report on Form
8-K filed on or about June 2, 1999 discloses these factors more fully.)
(end)
