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
Date of Report (Date of earliest event reported) February 5, 1997
SOVEREIGN BANCORP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-16533 23-2453088
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Ident. No.)
1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 320-8400
N/A
(Former name or former address, if changed since last report.)
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Item 5. Other Events
Acquisition of Bankers Corp.
Sovereign Bancorp, Inc. ("Sovereign") entered into an Agreement and Plan of
Merger, dated February 5, 1997 (the "Bankers Merger Agreement"), with Bankers
Corp. ("Bankers") providing for the merger (the "Bankers Merger") of Bankers
with and into Sovereign. Bankers, a New Jersey corporation, is the holding
company for Bankers Savings, a New Jersey savings bank ("Bankers Savings"). At
December 31, 1996, Bankers had total unaudited consolidated assets, deposits and
stockholders' equity of approximately $2.5 billion, $1.6 billion and $193
million, respectively. For the year ended December 31, 1996, Bankers had total
unaudited net operating income of $26.1 million, excluding a one-time charge of
$1.8 million (after-tax) incurred in the third quarter of 1996 that represents a
special assessment paid by Bankers to the FDIC to recapitalize the Savings
Association Insurance Fund. The primary operating entity of Bankers is Bankers
Savings, which operates 15 branches located in Middlesex, Monmouth and Ocean
Counties, New Jersey.
At the effective date of the Bankers Merger (the "Effective Date"), each
outstanding share of Bankers common stock will be exchanged for such number of
shares of Sovereign common stock, and related stock purchase rights, as shall
equal $25.00 divided by the average of the mean between the high bid and low
asked prices of a share of Sovereign common stock (as reported on the Nasdaq
National Market) for the fifteen consecutive trading days immediately preceding
the Effective Date (the "Sovereign Market Value").
This exchange ratio is subject to possible adjustment in the event that the
Sovereign Market Value as of the Effective Date is less than $11.00 per share or
greater than $16.50 per share. If, on the Effective Date, the Sovereign Market
Value is less than $11.00 per share, each outstanding share of Bankers common
stock will be converted into and become a right to receive 2.318 shares of
Sovereign common stock and related stock purchase rights (the "Maximum Exchange
Ratio"). If, on the Effective Date, the Sovereign Market Value is greater than
$16.50 per share, each outstanding share of Bankers common stock will be
converted into and become a right to receive 1.545 shares of the Sovereign
common stock and related stock purchase rights (the "Minimum Exchange Ratio").
Additionally, if both (i) the Sovereign Market Value on the date immediately
prior to the closing date is less than $10.31 and (ii) the number obtained by
dividing (A) the Sovereign Market Value on the date immediately prior to the
closing date (the "Determination Date") by (B) $13.75 is more than 15% less than
the number obtained by dividing (A) the weighted average of the closing sales
prices of a group of fifteen specified thrift institutions (the "Index Price")
on the Determination Date by (B) the Index Price on February 4, 1997,
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then Bankers may terminate the Bankers Merger Agreement unless Sovereign agrees
to increase the exchange ratio payable in the Bankers Merger so that Bankers
stockholders will receive Sovereign common stock with a value of $23.90 for each
share of Bankers common stock, in which case no termination will occur.
The Sovereign stock prices and the values described above for the Maximum
Exchange Ratio and the Minimum Exchange Ratio do not reflect the effects of the
6-for-5 stock split Sovereign declared January 16, 1997 and payable on March 14,
1997 to Sovereign shareholders of record on March 3, 1997. The Bankers Merger
Agreement contains customary anti-dilution provisions and such amounts will be
appropriately adjusted.
The transaction is expected to be accounted for as a pooling of interests
for financial reporting purposes and to qualify as a reorganization for federal
income tax purposes.
In connection with the execution of the Bankers Merger Agreement, Bankers
granted a stock option to Sovereign for it to purchase, under certain
circumstances, up to 19.9% of Bankers' outstanding shares pursuant to a stock
option agreement dated February 5, 1997 (the "Stock Option Agreement"). The
Stock Option Agreement is attached hereto as Exhibit 99.1 and is incorporated
herein by reference.
Upon completion of the Bankers Merger and other pending transactions,
Sovereign will have assets totaling approximately $12.3 billion, deposits
totaling approximately $7.2 billion and will operate over 145 Community Banking
Offices throughout a tri-state network. With a pro forma market capitalization
in excess of $1.2 billion, Sovereign will become one of the 10 largest thrift
holding companies in the country.
The transactions contemplated by the Bankers Merger Agreement are subject
to usual conditions, including regulatory approval, the approval of shareholders
of both Sovereign and Bankers and the receipt of fairness opinions from their
respective financial advisors. The Bankers Merger is expected to be completed in
the third quarter of 1997.
Sovereign currently has pending the acquisition (the "First State Merger")
of First State Financial Services, Inc., a $600 million financial institution
headquartered in West Caldwell, New Jersey ("First State"). The First State
Merger is expected to close on or before February 21, 1997 subject to approval
of First State stockholders at a special meeting of stockholders scheduled for
February 18, 1997. Therefore, First State stockholders are expected to become
shareholders of Sovereign eligible to vote on the Bankers Merger Agreement.
The descriptions and summaries included herein of the Bankers Merger
Agreement and the Stock Option Agreement are qualified in their entirety by
reference to such Agreements,
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which are attached hereto as Exhibits 2.1 and 99.1, respectively, and
incorporated by reference herein.
Comparative Per Common Share Data
The following table sets forth certain unaudited per common share data
relating to book value per common share, cash dividends declared per common
share, and net income per common share (i) on an historical basis for Sovereign,
First State, and Bankers, (ii) on a pro forma basis to reflect completion of the
First State Merger, (iii) on a pro forma basis to reflect completion of the
First State Merger and the Bankers Merger, (iv) on an equivalent pro forma
basis per share of First State common stock to reflect completion of the First
State Merger, and (v) on an equivalent pro forma basis per share of First State
common stock to reflect completion of the First State Merger and the Bankers
Merger. The following equivalent per common share data assume an exchange ratio
of 1.225 shares of Sovereign Common Stock for each share of First State common
stock (based on a closing sale price of $14.51 per share of Sovereign common
stock on February 11, 1997).
At Sept. 30, 1996(1)
----------------------------------
Excluding SAIF Including SAIF
Assessment Assessment At Dec. 31, 1995(1)
---------------- ---------------- -------------------
Book Value Per Common Share:
Historical:
Sovereign $ 8.05 $ 7.76 $ 7.40
First State 10.14 10.14 10.71
Bankers 15.30 15.15 14.47
Pro Forma (Sovereign and First State):
Pro forma per share of Sovereign Common Stock 8.07 7.80 7.49
Equivalent pro forma per share of First State Common Stock 9.88 9.55 9.18
Pro Forma (Sovereign, First State, and Bankers):
Pro forma per share of Sovereign Common Stock 8.11 7.89 7.58
Equivalent pro forma per share of First State Common Stock 9.93 9.67 9.29
For the nine months ended
Sept. 30, 1996(1)
----------------------------- For the year ended December 31,(1)
Excluding SAIF Including SAIF ----------------------------------
Assessment Assessment 1995 1994 1993
------------- -------------- ---- ---- ----
Cash Dividends Paid Per Common Share:
Historical:
Sovereign 0.063 0.063 0.084 0.106 0.099
First State 0.165 0.165 0.196 0.123 0.000
Bankers 0.460 0.460 0.520 0.400 0.250
Pro Forma (Sovereign and First State)(2):
Pro forma per share of Sovereign Common Stock 0.063 0.063 0.084 0.106 0.099
Equivalent pro forma per share of First State Common Stock 0.077 0.077 0.103 0.130 0.121
Pro Forma (Sovereign, First State, and Bankers)(2):
Pro forma per share of Sovereign Common Stock 0.063 0.063 0.084 0.106 0.099
Equivalent pro forma per share of First State Common Stock 0.077 0.077 0.103 0.130 0.121
Income from Continuing Operations Per Common Share:
Historical:
Sovereign $0.84 $0.55 $1.00 $0.90 $0.70
First State (0.25) (0.25) 1.01 0.91 0.65
Bankers 1.49 1.35 1.51 1.58 1.56
Pro Forma (Sovereign and First State)(3):
Pro forma per share of Sovereign Common Stock 0.76 0.49 0.98 0.89 0.89
Equivalent pro forma per share of First State Common Stock 0.93 0.50 1.21 1.08 0.64
Pro Forma (Sovereign, First State, and Bankers)(3):
Pro forma per share of Sovereign Common Stock 0.77 0.54 0.94 0.88 0.74
Equivalent pro forma per share of First State Common Stock 0.94 0.66 1.15 1.08 0.91
- ------------------
(1) Data reflect First State historical financial data at and for the nine
months ended June 30, 1996, and at and for the years ended September 30, 1995,
1994 and 1993. First State historical financial data for the nine months ended
June 30, 1996 do not include the one-time after-tax charge of $2.0 million
relating to the SAIF recapitalization or an after-tax charge of a total of $3.1
million relating to loan loss provisions and writedowns of real estate owned
taken by First State during the quarter ended September 30, 1996.
(2) Sovereign pro forma dividends per share represent historical dividends paid
by Sovereign. First State pro forma equivalent dividends per share represent
such amounts multiplied by an exchange ratio of 1.225 shares of Sovereign common
stock for each share of First State common stock.
(3) Sovereign pro forma income from continuing operations per common
share represents historical net income from continuing operations for Sovereign
and First State combined on the assumption that Sovereign and First State or
Sovereign, First State and Bankers, as the case may be, had been combined for
the periods presented on a pooling of interests basis, divided by the number of
shares of Sovereign common stock which will be issued and outstanding following
completion of the First State Merger or the Bankers Merger, as the case may be.
First State equivalent pro forma income from continuing operations per common
share represents such amounts multiplied by an exchange ratio of 1.225 shares of
Sovereign common stock for each share of First State common stock.
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Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
The (i) unaudited consolidated statements of condition of Bankers Corp. as
of September 30, 1996 and 1995 and the related consolidated unaudited statements
of income, changes in stockholders' equity and cash flows for the three-month
and nine-month periods ended September 30, 1996 and 1995, and related notes, and
(ii) consolidated statements of condition of Bankers Corp. as of December 31,
1995 and 1994, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1995, and related notes, and the report of KPMG Peat
Marwick LLP thereon, are incorporated herein by reference to Exhibits 99.2 and
99.3 hereof, respectively.
(b) Pro forma financial information.
Pro forma financial information showing the effects of the Bankers Merger
and the First State Merger is incorporated herein by reference to Exhibit 99.5
hereof.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated February 5, 1997, between Sovereign
Bancorp, Inc. and Bankers Corp.
99.1 Stock Option Agreement, dated February 5, 1997, between Sovereign
Bancorp, Inc. and Bankers Corp.
99.2 Unaudited consolidated statements of condition of Bankers Corp. as of
September 30, 1996 and 1995 and the related consolidated unaudited
statements of income, changes in stockholders' equity and cash flows
for the three-month and nine-month periods ended September 30, 1996 and
1995, and related notes.
99.3 Consolidated statements of condition of Bankers Corp. as of
December 31, 1995 and 1994, and the related consolidated statements of
income, changes in shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1995, and related
notes, including the report of KPMG Peat Marwick LLP thereon.
99.4 Consent of KPMG Peat Marwick LLP.
99.5 Pro forma financial information (unaudited).
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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 hereunto duly authorized.
SOVEREIGN BANCORP, INC
Dated: February 12, 1997
By /s/ Mark R. McCollom
---------------------------
Mark R. McCollom
Chief Accounting Officer
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EXHIBIT INDEX
Exhibit Number
2.1 Agreement and Plan of Merger, dated February 5, 1997, between
Sovereign Bancorp, Inc. and Bankers Corp.
99.1 Stock Option Agreement, dated February 5, 1997, between Sovereign
Bancorp, Inc. and Bankers Corp.
99.2 Unaudited consolidated statements of condition of Bankers Corp. as of
September 30, 1996 and 1995 and the related consolidated unaudited
statements of income, changes in stockholders' equity and cash flows
for the three-month and nine-month periods ended September 30, 1996
and 1995, and related notes.
99.3 Consolidated statements of condition of Bankers Corp. as of December
31, 1995 and 1994, and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1995, and related notes,
including the report of KPMG Peat Marwick LLP thereon.
99.4 Consent of KPMG Peat Marwick LLP.
99.5 Pro forma financial information (unaudited).
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