Sovereign, of Wyomissing, Pa., will acquire 90 Connecticut and Rhode Island branches on March 24; 86 Boston-area branches on June 26; and 109 branches in central Massachusetts and New Hampshire on July 21, enabling the bank to spread the payments across three fiscal quarters.
At chairman Jay S. Sidhu's insistence, Sovereign will also be allowed to withhold $350 million from the purchase price until next year - and would not have to pay at all if Fleet breaks its promise not to poach Sovereign's new employees and customers.
At the same time, the Office of Thrift Supervision is requiring Sovereign to file extensive and frequent reports showing that it can afford each step of the takeover, and that it is complying with federal lending limits and minimum capital requirements.
Indeed, Sovereign agreed to forgo the later stages of the acquisition if its capital reserves slip below federal guidelines, Albinson said.
Along with the branches, Sovereign is buying $12 billion in deposits and $9 billion in business and consumer loans, which Sovereign says will make it one of the three largest banks in New England. Sovereign is the fourth-largest bank doing business in Pennsylvania, and one of the biggest in the suburbs of northern and central New Jersey.
Sidhu said the step-by-step transaction will make the deal less risky because it delays Sovereign's need to finance the deal, thus reducing interest costs. "We are very excited," he said. He also said he expected that the expansion will, in the end, help Sovereign boost its capital reserves and reduce the company's future borrowing costs.
The deal had been widely panned by stock and bond analysts, who worried that Sovereign was spreading itself too thin. Its stock closed at $7.25 on Tuesday, down 37 cents from Monday - and more than 60 percent off its 1998 high.
Still, some investors see Sovereign's depressed price as a bargain now that the deal has been approved. "Jay Sidhu is 18 for 18" in making previous acquisitions pay, argued Domenic Rocco of Fox Chase, who said he bought "several thousand" Sovereign shares last year.
"The next few months may be painful, but I think it's a great investment down the road," Rocco added. "They're doubling the size of the bank."