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Cape Bancorp to merge into OceanFirst Financial in $208.1 million deal

Staff writer |
OceanFirst Financial Corp. of Toms River, N.J., and Cape Bancorp of Cape May Court House, N.J., jointly announced that they have entered into a definitive agreement and plan of merger.

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Cape, the holding company and parent of Cape Bank, will merge with and into OceanFirst, the holding company and parent of OceanFirst Bank.

Cape Bank will also merge with and into OceanFirst Bank. The transaction is valued at approximately $15 per Cape common share or approximately $208.1 million in the aggregate.

Founded in 1923, Cape Bank is one of Southern New Jersey’s largest community banks with approximately $1.6 billion in total assets, $1.3 billion in total deposits and $1.1 billion in gross loans. Cape operates 22 full-service banking centers and five loan offices, including two in the Philadelphia metropolitan area.

The transaction will enrich OceanFirst’s distribution, scale and core deposit funding base, creating the largest New Jersey headquartered bank operating in Central and Southern New Jersey. At closing, the combined institution is expected to have approximately $4.3 billion in total assets, $3.4 billion in total deposits, $3.2 billion in gross loans and 49 full-service banking locations.

Under the terms of the merger agreement, which has been unanimously approved by the Board of Directors of both companies, upon completion of the merger, shareholders of Cape common stock will be entitled to receive $2.25 in cash and 0.6375 shares of OceanFirst common stock for each share of Cape common stock held by the Cape shareholders.

The transaction is expected to close in the summer of 2016, subject to approval by the shareholders of each company, receipt of all required regulatory approvals and fulfillment of other customary closing conditions.

The purchase price equates to 141% of Cape’s September 30, 2015 tangible book value, 4.9% premium to core deposits, 19.1x Cape’s 2015 core earnings, and 10.2x Cape’s estimated 2016 earnings (including fully phased-in cost synergies). Tangible book value per common share is expected to be diluted by approximately 6.4% at closing with a projected earnback period of 3.5 years using the crossover1 method.

The transaction includes strong earnings per share accretion of approximately 13% in 2017, the first full year of combined operations. The combined company is structured to support enhanced financial return targets of greater than 1.0% return on average assets and greater than 12.0% return on average tangible common equity.

OceanFirst expects to incur pre-tax merger and integration costs of approximately $15.5 million and to achieve cost synergies totaling approximately 33% of Cape’s non-interest expenses or $12.2 million per year once fully phased-in.

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