PRINCETON, NJ-The headline is that FleetBoston is acquiring Summit Bancorp, based here, for $7 billion in an all-stock deal. It has implications for the real estate community in New Jersey if for no other reason than Summit, the largest NJ-based bank, is a major lender and asset-holder. Summit traces its roots to 1861 when it was Cumberland National Bank in Bridgeton, NJ and grew to its current size when it merged with United Jersey Bank two years ago. FleetBoston itself is the result of last year's merger of Fleet Financial and BankBoston.
The consensus is that the deal came down now for two major reasons. The first is the New Jersey market itself, which Fleet entered in 1995 when it acquired Jersey City-based NatWest. NJ is the third wealthiest and most densely populated state. It has nine of the country's 100 richest cities, and 25% of all households are worth $1 million or more. Half of the Fortune 500 are based or have major operations here.
The second major reason is that the price was right. Summit stock has flattened out in recent months, and the $7-billion price tag is a modest 2.4 times book value. In contrast, First Union paid five times book value for CoreStates three years ago.
By the numbers, the merger would give FleetBoston dominance in NJ with a 21% market share and 537 branches. Early speculation is that 75 branches may close, and an internal memo at Summit has already addressed the issue of “redundancies.” The combined companies would have $220 billion in assets and 1,700 branches from Maine to Pennsylvania.
“This acquisition…provides significant value to our shareholders, customers, employees and members of our community,” says Summit CEO T. Joseph Semrod in a prepared statement. Semrod will stay on for two years as chairman of FleetBoston's NJ operations and vice-chairman of its board. Summit vice chairman John Collins will become the bank's New Jersey president.
Both boards have approved the deal, which is expected to close next March. It's still subject to approval of Summit shareholders' as well as regulatory scrutiny.
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