Merchants Bancshares to Acquire NUVO Bank & Trust Co.

SPRINGFIELD — Merchants Bancshares Inc., the parent company of Merchants Bank, and NUVO Bank & Trust Co. jointly announced the signing of a definitive agreement pursuant to which Merchants will acquire NUVO for approximately $21.8 million in stock and cash, which represents $7.15 per share.

Headquartered in Springfield, NUVO is focused on providing business loans, deposits, and cash-management services to small and medium-sized businesses and individuals in Western Mass. At Dec. 31, 2014, NUVO reported approximately $153 million in assets, $139 million in loans, and $134 million in deposits. Merchants had approximately $1.7 billion in total assets as of Dec. 31, 2014, with total shareholder equity of approximately $125.8 million.

“We are excited to enter the Greater Springfield market through a combination with NUVO Bank & Trust,” said Michael Tuttle, president and CEO of Merchants Bancshares. “The market has witnessed a great deal of change recently, the NUVO team is extremely experienced, and the growth opportunity is significant. We plan to invest in and grow the NUVO team and business. While operational areas will be combined, the value created in this merger will be more attributable to revenue growth than expense reduction. We look forward to welcoming the NUVO banking team to our Merchants family.”

Under the terms of the agreement, shareholders of NUVO may elect to receive either 0.2416 shares of Merchants common stock or $7.15 in cash for each share of NUVO common stock outstanding, subject to total consideration being comprised of approximately 75% stock and 25% cash. Holders of NUVO common-stock options will receive a cash payment for the difference between $7.15 and the exercise price of the option, while warrant holders of NUVO may either be cashed out in a similar fashion or receive an equivalent warrant to acquire Merchants stock. The merger price of $7.15 per share is equivalent to approximately 133% of NUVO’s tangible book value at Dec. 31, 2014 and 51.9 times NUVO’s last 12 months’ earnings.

The agreement has been approved by both institutions’ boards of directors. The closing is anticipated to occur during the fourth quarter of 2015, subject to approval by NUVO shareholders, receipt of required regulatory approvals, and other customary closing conditions. Merchants expects the transaction to be accretive to its earnings in the first full year of combined operations.

NUVO’s chairman, Donald Chase, is expected to join the boards of directors of both Merchants Bancshares Inc. and Merchants Bank. In addition, Merchants has entered into employment agreements with M. Dale Janes, NUVO’s CEO, and Jeffrey Sattler, NUVO’s president and chief loan officer. NUVO will remain a distinct brand and operate as a division of Merchants Bank.

“There is tremendous opportunity in our market, and we believe that we can best capitalize on it by leveraging the liquidity, expanded lending limits, lower-cost deposit base, and broader product range of a strong partner like Merchants,” Chase said. “Additionally, Merchants’ publicly traded stock and dividends will be attractive to our shareholders. We have admired Merchants for some time, and getting to know their team better has reinforced the fact that we share common values and a similar operating philosophy.”

Added Geoffrey Hesslink, president and CEO of Merchants Bank, “the NUVO banking team will be able to lead credit opportunities of greater size, close more aggregate volume, and fund the business at a lower cost of funds with our combined balance sheet. In addition, we will be able to provide their team additional products, including municipal banking and wealth and asset management, as well as expanded mortgage offerings, with which to serve their market while keeping their own unique operating brand.”