Provident Financial Services to Buy First Sentinel Bancorp for 4.85 Times Revenue

Weekly Corporate Growth Report, Jan 5, 2004

The Deal: Provident Financial Services Inc. has signed a definitive agreement to acquire First Sentinel Bancorp Inc. in a cash and stock deal valued at $642 million. Each share of First Sentinel stock will be exchanged for either 1.092 shares of Provident Financial or $22.25 in cash. Under the terms of the agreement, 60 percent of First Sentinels common shares will be converted into Provident stock and the remaining 40 percent into cash. The deal has been approved by the boards of both companies but still requires regulatory and shareholder approvals. The deal is expected to close in the second quarter of 2004.

Discussion: First Sentinel Bancorp is the holding company for First Savings Bank. The bank operates about two dozen branch offices serving central New Jersey. Residential mortgages make up more than two-thirds of the bank's loan portfolio.

Provident Financial Services is the holding company for The Provident Bank. The bank has been serving northern and central New Jersey since 1839. The bank, which has about 50 branches, offers traditional banking services, Internet banking, investment advice, and trust services. Provident subsidiary Provident Investment Services sells insurance and investment products. Provident Mortgage, another subsidiary, writes FHA and VA loans for sale into the secondary market. Provident Financial went public in January 2003. Provident expects the acquisition to boost it 2004 earnings by 11 percent and its 2005 earnings by nearly 22 percent.