Lakeland Bancorp in Oak Ridge, N.J., has agreed to buy 1st Constitution Bancorp in Cranbury, N.J.
The $7.8 billion-asset Lakeland said in a press release Monday that it will pay $244.4 million in stock for the $1.3 billion-asset 1stConstitution. The deal, which is expected to close by early 2022, priced 1st Constitution at 157% of its tangible book value.
The acquisition will give Lakeland its first branches in New Jersey’s Mercer, Middlesex and Monmouth counties.
The acquisition “provides attractive financial attributes to shareholders of both Lakeland and 1st Constitution,” Thomas Shara, Lakeland’s president and CEO, said in the release. “This merger is consistent with our recent initiatives to expand into desirable markets.”
Robert Mangano, 1st Constitution’s president and CEO, will join Lakeland’s board.
The deal is expected to by 10.1% accretive to Lakeland’s earnings per share. It should take a little more than three years for Lakeland to earn back a projected 3.9% dilution to its tangible book value.
Lakeland said it plans to cut about 44% of 1st Constitution’s annual noninterest expenses, or roughly $18.2 million. The company expects to incur $18 million of merger-related expenses.
“The deal certainly makes sense strategically as [1st Constitution] represents one of the last good franchises of any size left in New Jersey,” Frank Schiraldi, an analyst at Piper Sander, wrote in a note to clients.
“Bottom line, we like the deal strategically but look at it as a bit expensive and [we] do see some risk to the 10% accretion,” Schiraldi added.
Keefe, Bruyette & Woods and Luse Gorman advised Lakeland. Raymond James and Day Pitney advised 1st Constitution.