Eastern Bankshares, Inc., the parent company of Eastern Bank, announced two major strategic moves on Monday, September 19, 2023. The company agreed to sell its insurance operations to Arthur J. Gallagher & Co. for $510 million and to merge with Cambridge Bancorp, the parent company of Cambridge Trust Company, for $528 million.
Eastern Bankshares to Exit Insurance Business
Eastern Bankshares said that it has entered into a definitive agreement to sell its insurance operations, Eastern Insurance Group, LLC, to Arthur J. Gallagher & Co., a global insurance brokerage and risk management services firm. The deal is expected to close in the fourth quarter of 2023, subject to regulatory approvals and customary closing conditions.
Eastern Insurance Group is the third largest bank-affiliated insurance brokerage in the country, with over 500 employees and 25 offices in Massachusetts, New Hampshire and Rhode Island. The company offers a range of personal and commercial insurance products and services, including property and casualty, employee benefits, life and health, and specialty lines.
Eastern Bankshares said that the sale of its insurance business will allow it to benefit from the valuation premium and redeploy capital for in-market strategic growth opportunities. The company expects to record a net gain on sale of approximately $260 million after taxes.
Bob Rivers, Chief Executive Officer and Chair of the Board of Eastern Bankshares, Inc. and Eastern Bank, said that the decision to sell Eastern Insurance was not easy, but it was in the best interest of the company and its stakeholders.
“We are proud of the success and growth of Eastern Insurance over the past 25 years under the leadership of Hope Aldrich and her team. However, we believe that this transaction will enable Eastern Insurance to continue its growth trajectory with a partner that is solely focused on the insurance business and has a global reach and scale,” Rivers said.
He added that Eastern Bankshares will remain committed to serving its customers’ insurance needs through its referral partnership with Gallagher.
Eastern Bankshares to Merge with Cambridge Bancorp
Eastern Bankshares also announced that it has entered into a definitive merger agreement with Cambridge Bancorp, the parent company of Cambridge Trust Company, a commercial bank that provides private banking, wealth management and investment services. The merger agreement has been unanimously approved by both boards of directors.
Under the terms of the merger agreement, each share of Cambridge common stock will be exchanged for 4.956 shares of Eastern common stock. Based on Eastern’s closing price of $13.41 per share on September 18, 2023, the transaction is valued at approximately $528 million. The aggregate consideration represents 114% of Cambridge’s tangible book value* and a 24% premium to Cambridge’s thirty-day volume weighted average price.
The merger is expected to close in the first quarter of 2024, subject to shareholder approvals, regulatory approvals and customary closing conditions.
Upon completion of the merger, Denis Sheahan, Chairman, President and CEO of Cambridge, will become the CEO of Eastern and will join Eastern’s Board of Directors. Quincy Miller, President of Eastern, will be promoted to Vice Chair, President and Chief Operating Officer. Both Sheahan and Miller will report directly to Rivers, who will serve as Executive Chair and Chair of the Board of Directors. In addition, three Cambridge directors are expected to join Eastern’s Board of Directors.
The combined company will have approximately $27.1 billion in total assets, $18 billion in total loans, $22.6 billion in deposits and $7.6 billion in client assets under management and administration (AUMA). It will operate under the Eastern Bank brand name for its banking business and under the Cambridge Trust brand name for its wealth management and private banking business.
The merger will create the largest Boston-based community bank by deposits1 and the largest bank-owned independent investment advisor in Massachusetts2. It will also enhance the combined company’s financial performance, profitability and efficiency.
Rivers said that the merger with Cambridge is a “once-in-a-lifetime opportunity” to combine two complementary institutions with shared values and missions.
“We have long admired Cambridge Trust’s success in building a premier private banking and wealth management franchise with a loyal and affluent client base. Together, we will leverage our combined strengths to create a more diversified and balanced business mix that will drive sustainable growth and profitability,” Rivers said.
Sheahan said that he is excited to join forces with Eastern Bankshares and lead the combined company as its CEO.
“Eastern Bankshares is an ideal partner for us as we share a common vision of delivering exceptional service and value to our customers while making a positive impact on our communities. We believe that this merger will create significant value for our shareholders, customers, employees and communities,” Sheahan said.
He added that Cambridge Trust will retain its brand identity and leadership team as it continues to serve its wealth management and private banking clients with enhanced capabilities and resources