KBW Analysts Positive On People's United Financial's Suffolk Bancorp Buy

KBW analysts are positive on People's United Financial, Inc. (NASDAQ: PBCT)'s planned acquisition of Suffolk Bancorp (NYSE: SCNB) for $402.3 million in an all-stock deal that would boost the former's Long Island presence.

The Proposed Deal

Suffolk Bank will add 28 branches, $2.3 billion of assets, $1.8 billion of deposits, and $1.8 billion of loans to People's existing Long Island franchise.

"SCNB's assets comprise only 6 percent of PBCT's; therefore, the pro forma balance sheet impact is fairly minimal. That said, we think SCNB, as well as the naming of Suffolk President and CEO, Howard Bluver as People's New York Market President, will serve to enhance PBCT's Long Island franchise," analyst Collyn Gilbert wrote in a note.

Further, the analyst said the deal will bring People's' market share position to number two in key counties surrounding New York City.

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In addition, although the analyst liked the acquisition from a strategic perspective, Gilbert noted that the pricing for People's appears full. People's indicated that it does, however, expect to achieve revenue synergies; yet, they did not disclose the specifics of those opportunities. People's expects 1 percent EPS accretion and 1 percent TBV dilution, on cost saves of 50 percent.

"While, we did view SCNB as an eventual seller, we did not expect the timing to be this soon. Therefore, we tend to view SCNB's own CRE concentration/capital position to be a key consideration in their sale," Gilbert highlighted.

The acquisition is likely to lift People's' commercial real estate (CRE) concentration ratios to 283 percent of total capital from 276 percent standalone.

Gilbert has a Market Perform rating on People's with a target price of $16.

At time of writing, People's was up 1.88 percent on the day minutes before closing bell, trading at $14.10. Suffolk was up 2.35 percent, trading at $30.02.