Raymond James has shifted its view on Webster Financial (NYSE:WBS), downgrading the shares from Outperform to Market Perform in the wake of Banco Santander's announced acquisition of the bank. The brokerage firm said the move reflects constrained upside for Webster shares now that they are trading close to the deal price.
At the time of Raymond James' note the stock was trading at $72.31, slightly under its 52-week high of $73.87. The acquisition agreement will deliver $75.00 per Webster share to its holders under a transaction valued at roughly $12.2 billion. The consideration is structured as 65% cash and 35% stock.
Raymond James highlighted that the agreed price already incorporates a reasonable market premium of about 14%, leaving limited scope for further gains from current levels. The firm pointed to Webster's strong recent performance, noting a 33.95% price return over the last six months and a 25.42% return over the past year.
In its assessment, Raymond James also observed that the acquisition price is a premium to prevailing peer valuation multiples, which in their view supports the probability that the transaction will close as currently structured. That said, the firm did not wholly dismiss the possibility of competitive interest. It noted M&T's publicly stated appetite to expand in the Northeast as a potential source of a rival bid, but flagged several obstacles to such a scenario.
Specifically, Raymond James identified an elevated tangible book value per share earnback at current valuation levels and a meaningful termination fee as hurdles that could deter competing offers. Those factors, combined with the transaction premium, underpinned the brokerage's conclusion that further upside is unlikely absent a new fundamental catalyst.
Other sell-side firms reacted to the Santander deal by adjusting their coverage and price targets for Webster Financial. UBS lowered its recommendation from Buy to Neutral and set a price target of $75.00. Stephens moved from Overweight to Equal Weight with a $73.00 target. Jefferies reduced its rating from Buy to Hold and trimmed its target to $75.00 from $80.00. RBC Capital downgraded the stock from Outperform to Sector Perform while raising its target to $75.00. By contrast, Keefe, Bruyette & Woods increased its price target to $77.00, citing solid fourth-quarter results and an uptick in loan growth momentum.
The downgrade by Raymond James centers on the lack of identifiable, near-term fundamental drivers that could push Webster Financial's share price meaningfully above the agreed $75.00 per-share consideration from Banco Santander. While the market will remain attentive to any development that could alter the competitive landscape for the deal, the current consensus among several brokerages reflects broader acceptance of the transaction terms.