The leadership at Boston Private Financial Holdings wanted to negotiate a joint venture with SVB Financial Group — but ended up striking a deal to sell the company to SVB instead.
The $116 billion-asset SVB, the Santa Clara, Calif., parent of Silicon Valley Bank, agreed on Jan. 4 to buy the $10 billion-asset Boston Private for $900 million in cash and stock. By sale price, the deal ranks among the 10 biggest bank acquisitions announced since late 2019.
Talks between the companies began nearly a year ago and initially centered on plans to establish a wealth-management joint venture. It took SVB nearly five months to present its first proposal to buy Boston Private, according to
Boston Private also fielded inquiries from two other potential acquirers: a similar-sized bank with a “significant” wealth management business and an unnamed wealth management and investment banking firm. Each company floated offers that were below what SVB was willing to pay.
The filing also disclosed that while Boston Private kept pushing SVB to increase its offer it did not seek competing offers.
The lack of an auction process is notable because a big investor has been pressuring Boston Private for more details about the decision to sell to SVB. HoldCo Asset Management in New York, which owns about 4.9% of Boston Private’s stock and is trying to get five nominees elected to the company’s board, has expressed disappointment with the deal’s value.
The filing makes it clear that Boston Private did not consider itself a seller prior to its discussions with SVB. In fact, the company had spent the years before the pandemic considering potential acquisitions that would help build its wealth management business.
CEO Anthony DeChellis had preliminary talks with the CEO of a similar-sized California bank holding company in August 2019. But Boston Private’s board decided the other bank, which was looking to fetch a market premium, wasn’t “a strong cultural or strategic fit,” the filing said.
Boston Private’s discussions with SVB began in March 2020, with talks between DeChellis and Greg Becker, SVB’s president and CEO, initially focused on a wealth management partnership and other strategic alliances. While the companies entered into a confidentiality agreement to exchange more information, each had a different agenda.
“At this time, SVB was focused on exploring a potential acquisition of Boston Private, while Boston Private was focused on exploring a potential joint venture or similar business relationship that did not include an acquisition,” the filing said.
SVB made its first pitch to buy Boston Private in mid-August, proposing a deal valued at about $625 million, based on Boston Private’s outstanding shares on July 31. The proposal valued Boston Private at about 82% of its tangible book value.
DeChellis told Becker on Aug. 13 that the amount was insufficient, prompting SVB to increase its offer to $662 million, or roughly 87% of Boston Private’s tangible book value. Again, Boston Private deemed the amount to be too low.
Becker told DeChellis in early September that SVB was open paying $760 million, equal to 100% of Boston Private’s tangible book value and a 54% premium to its stock price at the time, depending on the results of due diligence.
An unnamed bank with a “significant wealth management business” reached out to DeChellis in early September to discuss a potential merger. The bank’s CEO also “expressed an interest” in hiring DeChellis to run its wealth management operations, the filing said.
DeChellis said “he was satisfied with his current job as CEO of Boston Private,” the filing added.
DeChellis received a call on Sept. 29 from an executive at a wealth management and investment banking firm who expressed an interest in buying Boston Private for about $554 million. DeChellis told the executive that the price was too low, and “no proposal or indication of interest was ever provided” by the company, the filing said.
SVB amended its offer on Nov. 13, proposing a range of $740 million to $761 million, based on Boston Private’s outstanding shares on Oct. 31, with up to one-fifth of the purchase price consisting of cash.
The filing details the deliberations Boston Private’s board had in the final months of 2020 as it weighed the proposals from SVB, overtures from other financial institutions and the prospects of remaining independent.
Boston Private’s board determined during a Nov. 18 meeting that SVB had complementary businesses, strong financial performance and a stock price that had “significant further upside potential,” the filing said. Still, directors wanted a higher price.
Becker indicated a few days later that SVB could pay $827 million.
The unnamed company that pitched hiring DeChellis returned in late November, contacting Boston Private’s investment bank to gauge the potential for a deal while expressing an interest in “an ongoing role” for DeChellis. The CEO told DeChellis on Dec. 4 that he was open to a deal valued at $864 million.
“Following this conversation, no proposal or indication of interest was ever provided,” the filing said. “And no further inquiries … regarding a transaction were ever received by Boston Private or its representatives.”
The filing makes no specific mention of First Foundation in Irvine, Calif., which had been “persistently” trying to engage Boston Private about a merger, based on comments attributed to Scott Kavanaugh, the company’s CEO, in
Kavanaugh said his last conversation with DeChellis took place “towards the end of November,” when he was told that Boston Private had no interest in selling, according to the HoldCo letter.
First Foundation, with $7 billion of assets and $4.9 billion of assets under management, would fit the filing’s description.
Boston Private told SVB on Nov. 27 that it would support exclusive negotiations if SVB increased its offer to $905 million. SVB responded on Dec. 4 with a cash-and-stock offer capped at $864 million, which was good enough to secure a 30-day exclusivity agreement with an automatic 15-day extension if they were still negotiating in good faith.
Discussions were advanced enough on Dec. 27 that SVB sent DeChellis potential employment terms for after the deal closed. SVB's offer eventually increased to $900 million, and each board unanimously approved the merger on Jan. 4. It was
The deal, which is expected to close in mid-2021, priced Boston Private at 115% of its tangible book value.
DeChellis, who will become CEO of private banking and wealth management at Silicon Valley Bank when the deal closes, is set to receive a $700,000 annual salary and a chance to earn an annual cash bonus of up to $805,000, the filing said. He could also earn an annual equity incentive valued at $1.5 million. He will also be eligible to receive service- and performance-vesting restricted stock awards with a fair value of $7 million.
