Exhibit 99.1
Thacher
Proffitt
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Thacher Proffitt & Wood LLP
1700 Pennsylvania Avenue, N.W.
Suite 800
Washington, DC 20006
(202) 347-8400
Fax: (202) 626-1930
www.tpw.com
March 20, 2007
VIA OVERNIGHT DELIVERY
Mr. Marc J. Bistricer
10 Prue Avenue, Suite 601
Toronto, Ontario
Canada M6B 1R4
Re: Westborough Financial Services, Inc.
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Dear Mr. Bistricer:
This letter is to inform you that in accordance with its fiduciary
duties, the Board of Directors (the "Board") of Westborough Financial Services,
Inc. ("Westborough Financial") has thoroughly reviewed and discussed the
proposal outlined in your letter delivered to the Board on February 28, 2007.
The Board of Directors conducted a meeting with respect to your proposal
on March 12, 2007 and, after consultation with its legal and financial
advisors, determined that the proposal contained in your letter does not
qualify as a "Superior Proposal" as defined in the merger agreement with
Assabet Valley Bancorp. The Board also determined that neither further
discussions with you, nor the provision of confidential information to you,
would be reasonably likely to lead to a "Superior Proposal."
In reaching these conclusions, the Board noted that Westborough
Financial, Westborough Bancorp, MHC and The Westborough Bank (collectively,
"Westborough") had, in light of Westborough's extensive strategic analysis and
evaluation of local market conditions, made a decision to pursue a combination
with another financial institution. The merger with Assabet will strengthen
Westborough's financial condition on a going-forward basis while providing
Westborough's customers, depositors and community with access to the products
and services offered by a stronger and more diverse financial institution. The
appeal of a merger with another financial institution is that it presents the
opportunity to address a number of challenges currently affecting Westborough
on an independent basis such as its declining operating results, margin
compression, need to add depth to its management succession plan and continued
competitive challenges. The Assabet merger will result in a larger, stronger
and more competitive financial institution with the benefits of an experienced
and stable management team that shares the same core values and institutional
beliefs, an expanded product line, an enhanced technological platform, and more
choices and convenience for Westborough's customers and communities and
New York, NY Washington, DC White Plains, NY Summit, NJ Mexico City, Mexico
Marc J. Bistricer
March 20, 2007 Page 2.
strengthened prospects for the future. These considerations are particularly
relevant in light of the mutual nature of Westborough Financial's majority
stockholder and its obligations to consider the interests of Westborough's
customers and the community Westborough has served for 140 years. While the per
share consideration proposed to be paid to a minority of Westborough
Financial's shareholders might (if the transaction could be accomplished under
applicable law) be higher in your proposal than that which will be paid
pursuant to the merger agreement with Assabet, none of these other important
advantages are present in your proposal.
The Board also noted that your proposal, which is for the purchase of
approximately 36% of the outstanding shares of Westborough Financial, is
contingent upon "majority" representation on Westborough Financial's Board of
Directors. As you are aware, the owners of Westborough Financial's minority
public shareholders do not currently control a majority of Westborough
Financial's Board of Directors. In fact, Massachusetts law provides that in no
event shall Westborough MHC hold less than fifty-one percent of the combined
voting power of all classes of securities of Westborough Financial that have
voting power in the election of directors of Westborough Financial.
In addition, the Board considered the execution risks associated with a
number of uncertainties contained in your proposal. For example, while your
letter states that you "are confident that all applicable [regulatory]
approvals would be obtained without unreasonable delay," the Board noted that a
banking industry transaction structured like the one outlined in your proposal
and involving companies in the mutual holding company form of organization has
never been accomplished to our knowledge; moreover, the Board questions whether
it would be legally permissible for Westborough MHC to delegate to an
individual investor or group of investors the majority control of Westborough
Financial and The Westborough Bank, as mutual holding companies are required by
applicable law to retain control of their formerly mutual banking subsidiaries.
Secondly, your proposal contemplates a four-week due diligence process after
which you could easily lower your proposed purchase price or withdraw your
proposal in its entirety if, in your opinion, "anything of a materially adverse
nature" was discovered. We also believe that a four-week due diligence period
is unusually long for an acquisition of this type. We typically see diligence
accomplished within one week.
Finally, the Board considered the current well-developed status of
Westborough's pending merger with Assabet to be an important factor in reaching
its decision. And the Board noted that your proposal was received 107 days
(more than three months) after public announcement of the Assabet merger. All
regulatory applications have been filed, the FDIC application has already been
approved and Westborough Financial is in the process of responding to comments
from the Securities and Exchange Commission on its preliminary proxy statement.
In the Board's view, all of the remaining regulatory approvals necessary to
consummate the merger with Assabet are reasonably likely to be obtained in the
near future. At this stage in the process, to spend the time and effort
necessary to pursue your proposal, which as previously described, could quite
possibly never reach fruition for a number of different reasons, could
jeopardize the possibility of receiving the $35.00 share price and result in
adverse consequences to Westborough Financial's minority public shareholders.
Marc J. Bistricer
March 20, 2007 Page 3.
While we appreciate your interest in Westborough Financial, we hope that
you now understand why Westborough is not able to engage in any further
discussions with you at this time.
Sincerely,
/s/ Richard A. Schaberg
Richard A. Schaberg
cc: Joseph F. MacDonough
President and Chief Executive Officer
Westborough Financial Services, Inc.