Tower Bancorp To Buy First Chester For $65M

Tower Bancorp Inc. agreed Monday to buy neighboring First Chester County Corp. of West Chester, Pa. in an all-stock deal valued at about $65 million or about $10.22 per share.
Under terms of the deal, Harrisburg, Pa.-based Tower plans to give First Chester holders 0.453 of a Tower common chare for each First Chester share. That values First Chester at $10.22 per share, an 86% premium to Thursday's close of $5.50.
Tower chairman and chief executive Andrew Samuel said in a statement that First Chester's location is contiguous to Tower's current markets and the deal fits the company's strategy of expanding selectively.
"Upon closing we will be one of central and southeastern Pennsylvania's largest independent community banks," Samuel said.
John A. Featherman III, chairman, president and CEO of First Chester said the deal will "create significant value for First Chester shareholders, both immediately and longer term."
First Chester has $1.3 billion in assets as well as 23 branches situated across four counties in southeastern Pennsylvania. Tower has $1.4 billion in assets and 27 locations in central Pennsylvania and Maryland.
Tower Bancorp, with a market value of $160 million, is the result of a deal earlier this year to merge Graystone Bank and Tower Bank. And, as part of the First Chester deal, Graystone Tower Bank has agreed to increase its lending facility with First Chester to up to $26 million as well as to purchase up to $100 million of residential mortgages and commercial loans from First National Bank of Chester County in order for the bank to satisfy the regulatory capital requirements of the Office of the Comptroller of the Currency.
Tower expects the deal to close in the second quarter and management said it plans no branch closures, though 15% cost savings, or $12 million, are expected from streamlining back-office operations.
The transaction, approved by the boards of both companies, is expected to close in the second quarter pending shareholder and regulatory approvals.
Investment firm Keefe Bruyette & Woods Inc. provided Tower with financial advice and Rhoads & Sinon LLP provided legal counsel. First Chester was advised by the investment banking firm of Sandler O'Neill and Partners and the law firm of Hogan & Hartson LLP.