People's United Makes Its Move

People's United Financial(PBCT Quote) has finally made a leap into the M&A arena by agreeing to purchase Chittenden(CHZ Quote) -- a deal that will nearly double its size and create a big New England banking player.

People's, a $12 billion-asset bank based in Bridgeport, Conn., said Wednesday that it will acquire Burlington, Vt.-based Chittenden for $1.9 billion in stock and cash. The deal calls for People's to pay the equivalent of roughly $37 a share, based on the company's prior-day closing price, giving Chittenden shareholders a 31% premium.

The purchase marks People's first bank acquisition since 1998, but the deal isn't surprising. People's has been looking to do a deal that would expand it into the greater New England market, and it had openly stated that it is looking to "build the premier regional bank in the Northeast."

It needed to get its ducks in a row first. Last spring, People's began the process of converting from a state-chartered bank to a federal thrift. It also said at the time that it had planned to open 15 retail branches in Westchester County, N.Y. -- the company's first foray outside its home state of Connecticut.

In addition, People's had previously been operating under a mutual holding company structure in which 58% of its shares were locked up. Two months ago, the company completed a second-step offering in which it raised $3.4 billion from the public markets and no longer operates under the mutual holding company structure.