First Niagara to buy NewAlliance for $1.5 billion

The combined bank will have more than $29 billion in assets, including $18 billion in deposits, ranking it among the 25 biggest U.S. banks.

First Niagara's $14.09 per share offer represents a premium of about 24 percent to NewAlliance's Wednesday close of $11.36. NewAlliance shareholders will get 1.1 shares of First Niagara.

New York-based First Niagara, which has historically used M&A to drive growth, has made nine whole-bank and branch network-acquisitions in the past decade. This latest deal will add 88 NewAlliance branches in Connecticut and Massachusetts to its overall network of 255 branches.

With a market value of nearly $3 billion and with around $333 million in cash, First Niagara is one of the strongest regional banks in New York.

Shares of First Niagara fell 6 percent to a new 12-month low, indicating the lender could be overpaying. NewAlliance rose as much as 16 percent in more than four times its normal daily turnover. Trading in First Niagara was six times the 10-day average.

The deal, which will close in the second quarter of next year, is expected to add to First Niagara's earnings in 2011 and contribute about 4-5 percent to 2012 earnings.

NewAlliance will own about 30 percent of the combined company, the companies said on a conference call. First Niagara was advised by Sandler O'Neill + Partners, L.P., while NewAlliance was advised by J.P. Morgan.

(Reporting by Sweta Singh in Bangalore; Editing by Aradhana Aravindan)

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