425: Eastern-HarborOne Merger: ESOP Participant Guide

Eastern Bankshares and HarborOne Bancorp provide an FAQ for Employee Stock Ownership Plan participants regarding the upcoming merger and stock election process.

Summary

• Eastern Bankshares, Inc. (Eastern) and HarborOne Bancorp, Inc. (HarborOne) have entered into a merger agreement, with Eastern as the surviving entity.
• HarborOne Employee Stock Ownership Plan (ESOP) participants are entitled to elect to receive Eastern common stock, cash, or a mix for their allocated HarborOne common stock.
• For each share of HarborOne common stock, participants can elect 0.765 shares of Eastern common stock (Stock Consideration) or $12.00 in cash (Cash Consideration), or a combination.
• The Merger Agreement stipulates that no less than 75% but no more than 85% of HarborOne common stock will be exchanged for Stock Consideration, subject to proration.
• The election period for ESOP participants concludes at 5:00 p.m. Eastern Time on Thursday, October 23, 2025.
• Failure to make an election will result in the ESOP Trustee making the election proportionally based on other ESOP participants' choices.
• Fractional shares of Eastern common stock for ESOP participants will be exchanged and delivered proportionately, not subject to cash in lieu provisions.
• ESOP distributions are generally not eligible until a favorable determination letter on the ESOP termination is issued by the Internal Revenue Service (IRS), which is anticipated around October 2026 (up to 12 months from September 2025).
• The merger or ESOP termination alone will not result in a taxable event for participants; tax consequences arise when an ESOP distribution election (rollover or direct distribution) is made.
• The merger is anticipated to be completed on October 31, 2025, contingent on all regulatory approvals and satisfaction of other closing conditions.

Sentiment

Score: 6

Explanation: The filing provides clear, necessary information for ESOP participants regarding a significant corporate event. While it clarifies the process and expected timelines, the proration mechanism and the potential 12-month delay for ESOP distributions introduce some uncertainty and a waiting period for participants, preventing a higher score.

Positives

• HarborOne ESOP participants have the flexibility to elect between Eastern common stock, cash, or a combination for their shares.
• The merger is anticipated to be completed relatively soon, by October 31, 2025, indicating progress in the integration.
• The merger or ESOP termination itself does not immediately trigger a taxable event for participants, allowing for tax planning upon distribution.

Negatives

• Participants' elections for stock or cash are subject to proration, meaning they may not receive their exact elected consideration.
• ESOP distributions are delayed until a favorable IRS determination letter is received, which could take up to 12 months (around October 2026).
• The exact timing for merger completion cannot be guaranteed, as it is subject to regulatory approvals and closing conditions.

Risks

• Merger consideration elections are subject to proration, potentially leading to participants receiving a different mix of cash and stock than initially elected.
• The timing of ESOP distributions is contingent on receiving a favorable IRS determination letter, which could take up to 12 months, delaying access to funds.
• Completion of the merger is subject to receiving all regulatory approvals and satisfaction of other closing conditions, and the exact timing cannot be guaranteed.

Future Outlook

The merger is anticipated to be completed on October 31, 2025, pending regulatory approvals and satisfaction of other closing conditions. ESOP distributions are expected to be eligible around October 2026, following IRS determination.

Industry Context

This filing reflects ongoing consolidation within the banking sector, where regional banks merge to achieve scale, expand market reach, and potentially realize cost efficiencies. Such mergers often involve complex integration of employee benefit plans like ESOPs, requiring clear communication to affected participants.

Stakeholder Impact

• Shareholders (HarborOne ESOP participants): Will receive Eastern common stock, cash, or a mix for their HarborOne shares, subject to proration. Their ability to access ESOP funds will be delayed until IRS approval.
• Employees (HarborOne ESOP participants): Directly impacted by the ESOP termination and merger consideration election process.
• Eastern Bankshares: Will integrate HarborOne's operations and ESOP participants into its structure.

Next Steps

• HarborOne ESOP participants to receive an email communication on or around September 24, 2025, regarding the election process.
• HarborOne ESOP participants to make their Merger Consideration election by October 23, 2025, 5:00 p.m. ET.
• HarborOne to apply for a favorable determination letter upon termination of the ESOP with the IRS.
• Principal (HarborOne ESOP plan administrator) to send distribution packages to eligible participants once the IRS determination letter is received.
• Consultation with a tax advisor is recommended for ESOP distribution elections.

Key Dates

Recommendation

This filing is an informational FAQ for ESOP participants regarding an already announced merger. It does not provide new financial performance data or strategic shifts that would warrant a 'buy' or 'sell' recommendation for the broader market. For ESOP participants, the recommendation would be to 'hold' their current position until they make their election, and then potentially 'hold' the Eastern shares received, or 'sell' if they elect cash, based on their individual financial planning and risk tolerance. For general investors, the information is procedural and confirms the merger is on track, thus a 'hold' on existing positions in either company is appropriate based solely on this filing.

Keywords

Eastern Bankshares, HarborOne Bancorp, Merger, ESOP, Employee Stock Ownership Plan, Stock Consideration, Cash Consideration, Proration, SEC Filing, Corporate Action, Financial Services, Banking, Acquisition, Shareholder Election, IRS Determination Letter