Merger Agreement with Sterling Bancorp

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

Merger Agreement with Sterling Bancorp

Merger Agreement with Sterling Bancorp

On March 6, 2017, Astoria entered into an Agreement and Plan of Merger, or the Sterling Merger Agreement, with Sterling Bancorp, a Delaware corporation, or Sterling. The Sterling Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Astoria will merge with and into Sterling, with Sterling as the surviving corporation, such merger referred to as the Sterling Merger. Immediately following the consummation of the Sterling Merger, Astoria’s wholly owned subsidiary, Astoria Bank, will merge with and into Sterling’s wholly owned subsidiary, Sterling National Bank, such merger referred to as the Sterling Bank Merger. Sterling National Bank will be the surviving entity in the Sterling Bank Merger. The Sterling Merger Agreement was unanimously approved and adopted by the Board of Directors of each of Astoria and Sterling.

Subject to the terms and conditions of the Sterling Merger Agreement, at the effective time of the Sterling Merger, or the Effective Time, Astoria stockholders will have the right to receive 0.875 shares of common stock, par value $0.01 per share, of Sterling, or Sterling Common Stock, for each share of common stock, par value $0.01 per share, of Astoria Financial Corporation, or Astoria Common Stock. Also in the Sterling Merger, each share of Astoria 6.50% Non-Cumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, with a liquidation preference of $1,000 per share, issued and outstanding immediately prior to the Effective Time will be automatically converted into the right to receive one share of Sterling 6.50% Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $1,000 per share.

The Sterling Merger Agreement contains customary representations and warranties from both Astoria and Sterling, and each party has agreed to customary covenants, including, among others, covenants relating to (1) the conduct of Astoria’s and Sterling’s businesses during the interim period between the execution of the Sterling Merger Agreement and the Effective Time, (2) the obligation of Sterling to call a meeting of its stockholders to adopt the Sterling Merger Agreement and approve an amendment to its charter to increase the authorized shares of Sterling Common Stock from 190 million to 310 million, and, subject to certain exceptions, to recommend that its stockholders adopt the Sterling Merger Agreement and the transactions contemplated thereby, (3) the obligation of Astoria to call a meeting of its stockholders to adopt the Sterling Merger Agreement, and, subject to certain exceptions, to recommend that its stockholders adopt the Sterling Merger Agreement, and (4) Astoria’s non-solicitation obligations relating to alternative acquisition proposals. Astoria and Sterling have agreed to use their reasonable best efforts to prepare and file all applications, notices, and other documents to obtain all necessary consents and approvals for consummation of the transactions contemplated by the Sterling Merger Agreement.

The completion of the Sterling Merger is subject to customary conditions, including (1) adoption of the Sterling Merger Agreement by Astoria’s stockholders, (2) adoption of the Sterling Merger Agreement and approval of the Sterling charter amendment by Sterling’s stockholders, (3) authorization for listing on the New York Stock Exchange of the shares of Sterling Common Stock to be issued in the Sterling Merger, (4) the receipt of required regulatory approvals, including the approval of the Board of Governors of the Federal Reserve System, or FRB, and the Office of the Comptroller of the Currency, or OCC, (5) effectiveness of the registration statement on Form S-4 for the Sterling Common Stock to be issued in the Sterling Merger, and (6) the absence of any order, injunction or other legal restraint preventing the completion of the Sterling Merger or making the completion of the Sterling Merger illegal. The registration statement on Form S-4 for the Sterling Common Stock to be issued in the Sterling Merger was filed on April 5, 2017 and was declared effective by the SEC on April 28, 2017. Special meetings of Astoria’s and Sterling’s respective stockholders are scheduled to be held on June 13, 2017, at which Astoria’s stockholders will vote on the Sterling Merger Agreement and Sterling’s stockholders will vote on the Sterling Merger Agreement and the Sterling charter amendment. In addition, all applications and notices necessary to obtain the required regulatory approvals to complete the Sterling Merger have been submitted or sent by Astoria or Sterling.

Each party’s obligation to complete the Sterling Merger is also subject to certain additional customary conditions, including (1) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (2) performance in all material respect by the other party of its obligations under the Sterling Merger Agreement, and (3) receipt by such party of an opinion from its counsel to the effect that the Sterling Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code.

The Sterling Merger Agreement also provides certain termination rights for both Astoria and Sterling and further provides that a termination fee of $75.7 million will be payable by either Astoria or Sterling, as applicable, upon termination of the Sterling Merger Agreement under certain circumstances.