National Penn, KNBT merger sends shares of KNBT up; XM, Sirius slip back

By Sheri Kasprzak

New York, Sept. 7 - Another bank merger grabbed headlines on Friday - this time a merger between two regional banks.

National Penn Bancshares, Inc. and KNBT Bancorp said they intend to merge to form the fifth-largest Pennsylvania-based bank holding company. The $464.6 million merger is set to close late in the first quarter of 2008.

The merger news comes just a day after RBC Centura Banks Inc. agreed to buy Alabama National Bancorp in a $1.6 billion cash and stock deal for an estimated $80 per share. The purchase price is a 51% premium to Alabama National's $53.12 closing stock price on Wednesday.

"Obviously, these are two regional banks and that's a huge difference between a major bank holding corporation buying up a small regional," said one analyst on Friday morning. "Banks merge all the time. It's necessary in order for them to compete. It is very difficult for small, regional banks to compete in this market of mega-banks. It seems to me in this case [of National Penn and KNBT] it was necessary for the two regionals to merge in order to compete with other regionals."

In other news, shares of Jones Apparel Group, Inc. were down on Friday after the clothing wholesale company completed the sale of its Barneys New York, Inc. subsidiary to a Dubai-based investment firm. Jones also plans to repurchase stock from Goldman, Sachs & Co.

Elsewhere, shares of both XM Satellite Radio Holdings, Inc. and Sirius Satellite Radio Inc. fell on Friday, a day after an analyst said there was more than a 50% chance that the U.S. Department of Justice would approve a merger between the two satellite radio giants.

National Penn, KNBT to merge

Under the terms of the National Penn/KNBT merger, National Penn will survive the merger. Each share of KNBT will be exchanged for one share of National Penn and those shares will be increased to 1.03 shares of National Penn following its 3% stock dividend, which is scheduled for Sept. 28. The value is equal to $17.31 per KNBT share, a 20.5% premium to KNBT's $14.37 closing stock price on Thursday.

Shares of KNBT were up 15.17% on Friday before the opening bell after news of the merger agreement was announced. The stock went on to gain 93 cents, or 6.47%, to close at $15.30 Friday (Nasdaq: KNBT).

National Penn's stock, however, fell by $1.43, or 8.51%, to close at $15.38 (Nasdaq: NPBC). The stock gained 25 cents after hours.

Once all is said and done, the bank holding company will be headquartered in Boyertown, Pa., and the new company will retain a presence in the Lehigh Valley region of Pennsylvania, according to a statement released Friday by the two banks. The Keystone Nazareth Bank & Trust Co. name of KNBT will remain the same in six counties where KNBT operates.

"With this merger, we expect to create a new force in Pennsylvania-based financial services," said Glenn Moyer, chief executive officer of National Penn, in a statement.

"The combined organization will be better positioned to deal with the challenges facing our industry and will boast a depth and quality of management found only in much larger organizations. We look forward to working with Scott [Fainor, CEO of KNBT] as we focus our new team on the challenges and many opportunities that lie ahead."

Moyer will retain his post as CEO of the combined company. Fainor will remain on as senior executive vice president and chief operating officer.

National Penn said the merger may reduce its operating expenses by $26.2 million.

Jones sells off Barneys

Jones Apparel Group watched its stock slip slightly on Friday after the clothing wholesaler sold off its Barneys New York, Inc. subsidiary to Istithmar PJSC, a Dubai-based private equity firm.

Jones has also entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. to use a portion of the proceeds from the sale, according to a statement released Friday morning.

Istithmar paid $945 million in cash for Barneys.

Shares of Jones Apparel were off by 13 cents by 9:47 a.m. ET. The stock went on to lose 4 cents to end at $19.30 Friday (NYSE: JNY). The stock regained those 4 cents after hours.

Under the repurchase agreement, Jones will repurchase $400 million of its common stock with 15.5 million shares to be repurchased by Sept. 12. The rest will be received at the end of an initial valuation period - expected to be no later than July 19, 2008. As of Sept. 5, Jones had 103.9 million outstanding common shares.

"The repurchase of our stock is a compelling investment opportunity and reflects the board's confidence in the future of Jones," said Wesley Card, Jones Apparel's CEO, in the news release.

"We received substantial value for our investment in Barneys and we are pleased to return that value to our shareholders through this ASR program."

XM, Sirius shares off

A day after an RBC Capital Markets Corp. analyst said he feels a merger between XM Satellite Radio and Sirius Satellite Radio has a more than 50% chance of being approved by the U.S. Department of Justice, shares of both stocks were down. The combination of the two satellite radio providers has been contested because the Justice Department feels it might violate antitrust laws.

And a sell-side trader said Friday that the report by analyst David Bank of RBC really doesn't say anything useful. The trader noted that the shares were pushed solely by that news on Thursday.

"The stock is going to move on speculation," he said.

Shares of XM Satellite were lower on Friday. By 9:41 a.m. ET, the stock was off by 12 cents. The stock fell by 19 cents, or 1.39%, to end at $13.51 (Nasdaq: XMSR).

Sirius's stock was also off on Friday, giving up 5 cents, or 1.56%, to close at $3.16 (Nasdaq: SIRI).

The analyst's report sent shares of XM up 58 cents and shares of Sirius up 19 cents on Thursday.

"To me, this really doesn't say that much," said the trader. "Basically, he's saying, there's a more than 50% chance that they'll get the approval and maybe a 50% chance that they won't. I guess that it could be worse but it really doesn't tell us anything."

The note by Bank was released in response to a regulatory filing on Wednesday that the companies have provided the Justice Department with more information for a second inquiry round.

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