merger & acquisition

OceanFirst Financial Corp. Agrees to Acquire Sun Bancorp, Inc.

OceanFirst Financial Corp., headquartered in Toms River, and Sun Bancorp, Inc., headquartered in Mount Laurel, jointly announce that they have entered into a definitive agreement and plan of merger pursuant to which Sun, the holding company of Sun National Bank, will merge with and into OceanFirst, the holding company of OceanFirst Bank. Sun National Bank will also merge with and into OceanFirst Bank. Based on the closing price of OceanFirst common stock on June 29, 2017, the transaction is valued at approximately $25.27 per Sun common share or approximately $487 million in the aggregate.

As one of New Jersey’s largest community banks with approximately $2.3 billion in total assets, $1.7 billion in total deposits and $1.6 billion in gross loans, Sun operates more than 30 community banking centers across eleven New Jersey counties, as well as through commercial lending offices in Edison and Mount Laurel, New Jersey, and Manhattan, New York. Following OceanFirst’s recently completed acquisitions of Cape Bancorp, Inc. (“Cape”) and Ocean Shore Holding Co. (“Ocean Shore”), the proposed transaction will further enrich OceanFirst’s distribution, scale and core deposit funding base, presenting a unique opportunity to enhance its franchise.

OceanFirst will strengthen its position as the largest bank headquartered in central and southern New Jersey and gain greater access and proximity to more robust markets within the New York and Philadelphia metro areas.  Based on financial information as of March 31, 2017, the combined institution would have approximately $7.5 billion in total assets, $5.9 billion in total deposits, $5.4 billion in gross loans and expects to operate over 60 full-service banking locations once the combination is fully integrated.

Under the terms of the merger agreement, which has been unanimously approved by the Boards of Directors of both companies, the aggregate consideration to be paid in exchange for the Sun common stock consists of approximately 15.1 million shares of OceanFirst common stock and $72.5 million in cash.  The consideration a Sun shareholder will receive is equivalent to 0.7884 shares of OceanFirst common stock and $3.78 in cash per share of Sun common stock.  Sun shareholders will have the right to elect to receive stock or cash consideration for their shares, subject to proration, and the merger agreement will include a mechanic whereby the per share cash consideration and the implied value of the stock consideration will be equivalent based on the average OceanFirst share price over the five trading day period ending on the trading day immediately prior to the closing date. The transaction is expected to close early first quarter of 2018, subject to each company receiving the required approval of its shareholders, receipt of all required regulatory approvals and fulfillment of other customary closing conditions. Certain shareholders of Sun owning in the aggregate approximately 39% of Sun’s outstanding common stock have entered into support agreements with OceanFirst pursuant to which they have agreed to vote in favor of the merger agreement.

The purchase price equates to 169% of Sun’s March 31, 2017 tangible book value, 12.7% premium to core deposits and 14.5x Sun’s estimated 2018 earnings (assuming fully phased-in cost savings). Tangible book value per common share is expected to be diluted by approximately 1.2% at closing with a projected earnback period of approximately 3.5 years using the cross-over method.

The transaction is expected to be accretive to earnings per share by approximately 3.6% in 2019 in addition to the projected double-digit earnings accretion from OceanFirst’s acquisitions of Cape and Ocean Shore. The combined company will be structured to support enhanced efficiencies and operating leverage, leading to financial return targets of 1.20% return on average assets and 13.5% return on average tangible common equity along with maintaining a tangible common equity ratio of approximately 8.9% and remaining “well-capitalized” under regulatory guidelines.

OceanFirst expects to incur one-time pre-tax merger and integration costs of approximately $46 million and to achieve cost savings of approximately 53% of Sun’s noninterest expense base.

“This is an extraordinary opportunity for OceanFirst and we are very excited to welcome Sun customers and employees to the OceanFirst family. With overlapping market footprints and shared focus on the community bank business model, OceanFirst and Sun can leverage the strength of the combined company to create a premier New Jersey community banking institution,” said Christopher D. Maher, Chairman, President and Chief Executive Officer of OceanFirst.

Mr. Maher further commented, “We continue to capitalize on the opportunities that become available to us as we execute on our organic and strategic growth plans.  This transaction allows us to gain further market share across our existing central and southern New Jersey footprint, while also supporting growth with Sun’s operations in close proximity to the key metropolitan markets of Philadelphia and New York City. Sun’s strong core deposit franchise and the significant efficiency opportunities presented by an in-market merger make this a very compelling combination.  We look forward to continuing to provide extraordinary customer care to all OceanFirst and Sun customers, as well as providing enhanced value to our stockholders.”

Thomas M. O’Brien, President and Chief Executive Officer of Sun, echoed Mr. Maher’s comments stating, “We consider OceanFirst an ideal partner due to the strategic benefits a combination will provide for all Sun stakeholders.  Sun shareholders will benefit from pro forma earnings per share accretion of approximately 200%, a pro forma dividend increase of over 1,000% and increased shareholder liquidity.  Sun clients will enjoy enhanced product distribution capabilities and new consumer and Wealth Management products and services.” Mr. O’Brien added that “I am proud of the great strides our institution has made since 2014, and we are excited about the opportunity for Sun’s employees to continue growing by partnering with OceanFirst to create the premier community banking franchise in New Jersey.”

Piper Jaffray & Co. is serving as financial advisor to OceanFirst and rendered a fairness opinion to OceanFirst’s Board of Directors in connection with the transaction. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel to OceanFirst. Sandler O’Neill + Partners, L.P. is serving as financial advisor to Sun and rendered a fairness opinion to Sun’s Board of Directors in connection with the transaction.  Wachtell, Lipton, Rosen & Katz is serving as legal counsel to Sun.

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