Update: FleetBoston to Purchase Summit in $7 Billion Stock Deal

Updated from 8:15 a.m. EDT

FleetBoston Financial (FBF Quote), the nation's eighth-largest financial holding company, said it had agreed to buy Summit Bancorp (SUB Quote) in a stock deal valued at $7 billion.

Under the terms of the deal, shareholders of Princeton, N.J.-based Summit Bancorp, the leading retail and commercial bank in New Jersey, will receive 1.02 Fleet shares for each Summit share. Based on Friday's closing prices, this values Summit at $39.78 per share, or a 15.7% premium to Summit's market price. However, the deal represents a nearly 40% premium to what Summit was trading at prior to stories of an imminent buyout reached the financial markets last week.

Shares in Summit rose on the news, finishing up $3.75, or 11%, at $38.13, a new 52-week high. Fleet finished down 50 cents, or 1%, at $38.50.

The transaction, which is expected to close in the first quarter of 2001, will create a combined company with approximately $220 billion in assets. Of this, Princeton, N.J.-based Summit will contribute $39 billion. The company will also add over 500 branches across New Jersey, Pennsylvania and Connecticut to Fleet's approximately 1,200 branches in New England, New York and New Jersey.

"This transaction is an excellent geographic fit with our existing franchises, making Fleet the No. 1 bank in New Jersey and, for the first time, extending our banking franchise into the Philadelphia region," said Terrence Murray, Fleet's chairman and chief executive, in a statement.

The deal, which has been approved by both boards of directors, is expected to immediately add to Boston-based Fleet's earnings.

Fleet predicts it will save 30% from Summit's expense base, or $274 million, with 60% realized next year and 100% in 2002, according to a report released Monday by Putnam Lovell Securities.

"There should be meaningful opportunities to cut staffing in management and other support functions," the report said. "Finally, there should be the opportunity to consolidate 75 branches in New Jersey and another 10 in Connecticut, generating more cost savings."