Why M&T-People’s United met resistance in Connecticut

By most accounts, M&T Bank’s first acquisition in six years was moving along in typical fashion.

The Buffalo, New York-based company — which agreed in February to pay $7.6 billion to buy People’s United Financial in Bridgeport, Connecticut — had by late May secured the approval of shareholders in both banks. It was planning the process of forming the 11th largest U.S. bank, in anticipation of receiving regulatory approval by the end of the year.

But late last month, news of 747 pending job cuts in Connecticut — specifically those based in the city of Bridgeport — generated a level of backlash not seen in other recent bank deals. Criticism rolled in from local, state and federal officials who said they were caught off guard by the number of layoffs and questioned M&T’s long-term commitment to the economically distressed city.

Sen. Richard Blumenthal, D-Conn., (left) recently urged M&T Chairman and CEO René Jones to reverse plans for job cuts in Bridgeport, Connecticut. The Bridgeport headquarters of People’s United Financial, which M&T has agreed to buy for $7.6 billion, is shown on the right.

The outcry, which was swift and widespread, took some industry observers by surprise.

“It’s definitely gotten a lot more pushback than I’ve seen recently,” said Jim Perry, a senior strategist at Market Insights, a consulting firm based in Seattle that advises community banks and credit unions on growth opportunities. “I think the whole issue of anticipated job loss is the big motivator.”

Because of the number of job cuts, Bridgeport Mayor Joseph Ganim threatened to pull $30 million of public funds out of People’s United. State Sen. Marilyn Moore, D-Bridgeport, wanted public hearings to determine the cause of the layoffs. And U.S. Sen. Richard Blumenthal, D-Conn., urged M&T to reverse the cuts, saying the loss of 661 jobs in Bridgeport — about half of the entire People’s United workforce in that city — would create a ripple effect that would flow through the state’s economy.

“I continue to be deeply alarmed by this potentially destructive blow to loyal, hard-working People United Bank employees and our state economy,” Blumenthal wrote to M&T Chairman and CEO René Jones in an Aug. 2 letter. “It is important that M&T Bank reverse these terminations and their impact.”

M&T, which also plans to eliminate about 250 positions in Vermont and more than 30 in Massachusetts, moved quickly to offer assurances that it has big plans for Bridgeport, the largest city in Connecticut with a population of more than 140,000.

On July 26, four days after filing its layoff notice with the state of Connecticut, the $150.6 billion-asset bank said in a press release that it would retain approximately 80% of People’s United workforce, including all 1,068 customer-facing employees. It also announced its intention to turn People’s United’s headquarters building in downtown Bridgeport into M&T’s New England regional headquarters.

The following week, the bank ramped up its pledges, making a commitment to employ at least 1,000 people in Bridgeport within a year after the systems conversion that will be necessitated by the merger. The systems conversion is expected to occur in February 2022, pending the deal’s approval.

M&T also said it would give priority to laid-off People’s United employees when hiring to fill its 1,500 current open positions, including 1,000 jobs that are suitable for remote work.

Then in an Aug. 5 announcement, People’s reversed a decision to close all of its 84 in-store branches and ATMs located at Stop & Shop supermarkets. Twenty-seven of those 84 locations will now remain open, with nearly half of them located in low to middle-income neighborhoods, M&T said.

As of Dec. 31, 2020, People’s United employed 5,987 people, according to a regulatory filing. And as of Aug. 6, 1,306 people were based in Bridgeport, M&T stated. The company said it plans to keep 1,959 People’s United employees in Connecticut, or about 72% of the bank’s total workforce in the state.

M&T also pointed to its past performance in M&A and community reinvestment, pointing to cities such as Baltimore and Wilmington, Delaware, and saying that it rooted itself in those communities as a reliable, invested employer following acquisitions. M&T has been awarded the highest Community Reinvestment Act rating on every examination since 1982, it said.

“Be assured, M&T is committed to increasing our investment in the region and working closely with community leaders and businesses to help drive greater economic opportunity for city residents,” Jones replied to Blumenthal in an Aug. 10 letter. “We intend to be a strong corporate citizen, to grow our relationships and to drive … positive outcomes for all the areas currently served by People’s United.”

The recent scrutiny of M&T’s acquisition of People’s United stands out in today’s bank mergers-and-acquisitions landscape, which has been hot.

There are a few reasons that the pending acquisition may be getting heightened attention, according to industry observers. Those factors include the large size of the deal, the Democratic tilt of Connecticut and surrounding states, and an executive order issued last month by President Biden that calls for greater scrutiny of bank mergers as part of a broader effort to promote competition in the U.S. economy.

The latter two factors are particularly likely culprits, according to Jeremy Kress, a business law professor at the University of Michigan and a former attorney at the Federal Reserve, where he advised the agency on bank merger approvals.

He said the New England region “is politically a very Democratic area that’s more likely to be attuned to concerns about consolidation and job loss.”

The timing of the July 22 layoff announcement could also be a factor in the heightened scrutiny. In an effort to be transparent with stakeholders, M&T submitted its layoff notice to the state of Connecticut several months before the acquisition was expected to close, Jones told Connecticut Attorney General William Tong in an Aug. 5 letter.

Some banks wait to file such notices after their deals close. M&T has historically filed them before acquisitions are completed, as it did in the early months of its long-pending acquisition of Hudson City Bancorp in Paramus, New Jersey, which was finalized in November 2015.

“We deliberately chose to notify People’s United employees of their employment status prior to receiving regulatory approval of the merger because we firmly believe that each and every one of our team members — both affected and unaffected — has the right to understand what the merger means for them personally and to have as much time as possible to plan accordingly,” Jones wrote to Tong.

The negative press attention is at least partly a result of that decision, said Piper Sandler analyst Frank Schiraldi, who covers M&T.

“It could be argued that perhaps … they moved too aggressively in terms of the timing of these filings, particularly given the current environment,” Schiraldi said. “But at the end of the day, I think M&T seeks to be as transparent as possible and redundancies are obviously part of the deal math.”

For now, public officials in Connecticut appear to be satisfied with M&T’s plans to mitigate job cuts and invest in Bridgeport. In response to M&T’s Aug. 2 letter, Attorney General Tong wrote that the company “is making a significant public commitment to Connecticut jobs and to the city of Bridgeport.”

In a blog post that same day, state Sen. Moore said she is no longer pursuing public hearings about the job cuts.

Still, Connecticut officials will be paying close attention to what comes next. Tong pledged to “ensure local jobs are protected and Connecticut communities remain a priority.”

In the meantime, M&T executives, including Jones, are visiting different People’s United markets to get to know employees and how their businesses work.

The company will “continue to engage with state and local officials and community leaders to pursue shared goals of growing jobs, supporting impacted workers and further investing in those communities once the transaction closes,” a company spokeswoman wrote in an email.

If and how the backlash over M&T’s deal spills over into other deals will be something to watch, Schiraldi said.

“I think that in this environment the one thing it may change is that more people will be cautious about how they approach these deals and their expectations for downsizing,” he said.

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