OceanFirst Financial Corp., the holding company for OceanFirst Bank N.A., and Flushing Financial Corp., the holding company for Flushing Bank, have entered all-stock merger agreement where Flushing Bank will merge into OceanFirst Bank. The transaction is valued at $579 million and will create a regional bank serving the New Jersey, Long Island and New York markets.
The combined company is expected to have $23 billion in assets, $17 billion in total loans and $18 billion in total deposits across 71 retail branches.
OceanFirst also announced that it has entered into an investment agreement with affiliates of funds managed by Warburg Pincus LLC, which will invest $225 million for newly issued equity securities subject to the closing of the merger.
“This acquisition represents a natural extension of our proven growth strategy,” OceanFirst CEO and Chairman Christopher Maher said in a release. “We are bringing together two highly complementary organizations, leveraging Flushing’s 95-plus-year distribution channel in Long Island and New York alongside OceanFirst’s relationship-driven business model and robust products and services. We share a disciplined credit philosophy and long-term commitment to the communities we serve and are highly confident that this combination will enable us to better support our customers and deliver meaningful value for shareholders.”
Maher will serve as the CEO of the combined holding company following the merger. Flushing CEO and President John Buran will join OceanFirst as the non-executive Chairman of the Board after the closing of the merger. The board of directors will consist of 17 directors: 10 from the existing OceanFirst board, six from the existing Flushing board and one from Warburg Pincus.
“We are excited to partner with OceanFirst, an organization that shares our values and long-term vision,” Buran said. “This transaction creates meaningful opportunities for our clients, employees, and communities while preserving the relationship-focused culture that has defined our bank for nearly a century. We look forward to taking the next step in our journey with OceanFirst and for our shareholders to participate in the future upside resulting from creating a scaled, more profitable franchise together.”
Warburg Pincus Managing Director Todd Schell will also join the board.
“This combination marries OceanFirst’s scalable platform and robust product suite with Flushing’s distribution network and deep customer relationships,” Schell said. “We have known both franchises for a long time – they share an underlying culture and philosophy and are complementary in ways that unlock strategic value for the combined entity. This is a natural combination that can produce strong returns for shareholders.”
Upon completion of the merger, the shares issued to Flushing stockholders are expected to represent approximately 30 percent of the outstanding shares of the combined company, the shares issued to Warburg Pincus in the equity capital raise transaction are expected to represent approximately 12 percent and the shares of OceanFirst common stock are expected to represent approximately 58 percent of the outstanding shares.
The transaction is expected to close in the second quarter, subject to approval by OceanFirst and Flushing shareholders and regulatory approvals. The equity capital raise is expected to close concurrently with the merger.
Keefe, Bruyette & Woods, Inc., A Stifel Company, served as financial advisor to OceanFirst and Simpson Thacher & Bartlett LLP served as its legal counsel. Piper Sandler & Co. served as financial advisor to Flushing and Hughes Hubbard & Reed LLP served as its legal counsel. J.P. Morgan acted as capital markets advisor and sole placement agent to OceanFirst. Jefferies LLC served as financial advisor to Warburg Pincus and Wachtell, Lipton, Rosen & Katz served as its legal counsel.