425: Eastern-HarborOne Merger: ESOP Participant Election Guide

HarborOne ESOP participants receive detailed instructions on electing cash or stock consideration for their shares in the upcoming merger with Eastern Bankshares.

Summary

• Eastern Bankshares, Inc. and HarborOne Bancorp, Inc. have entered into a merger agreement, with Eastern as the surviving entity.
• HarborOne ESOP participants are entitled to elect to receive, for each share of HarborOne common stock, either 0.765 shares of Eastern common stock (Stock Consideration), $12.00 in cash (Cash Consideration), or a combination of both.
• The merger consideration elections are subject to proration, ensuring that no less than 75% but no more than 85% of HarborOne common stock shares are exchanged for Stock Consideration.
• An email communication regarding the election process is expected on or around Wednesday, September 24, 2025, with the election period for ESOP participants ending 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 to other ESOP participants' choices, subject to proration.
• ESOP participants will generally not be eligible to receive distributions until a favorable determination letter on the termination of the ESOP is issued from the IRS, which may take up to 12 months (around October 2026).
• The merger or ESOP termination alone will not result in a taxable event to ESOP participants; tax consequences will arise when a distribution is taken.
• The merger is anticipated to be completed on October 31, 2025, assuming receipt of all regulatory approvals and satisfaction of other closing conditions.

Sentiment

Score: 7

Explanation: The filing provides clear, comprehensive information to ESOP participants about a complex process, which is positive for transparency. However, the proration risk and the delay in ESOP distributions introduce some minor uncertainties for participants.

Positives

• ESOP participants are provided with clear options to elect between cash, stock, or a combination for their HarborOne shares.
• The merger and ESOP termination themselves do not immediately trigger taxable events for participants, allowing for future tax planning.
• Detailed guidance and contact information are provided to assist ESOP participants through the election and distribution process.

Negatives

• Participants' elected merger consideration may be adjusted due to proration rules, meaning they might not receive their exact desired mix of cash and stock.
• ESOP distributions are subject to a significant delay, as eligibility is tied to receiving an IRS favorable determination letter on ESOP termination, which could take up to 12 months (around October 2026).
• A strict deadline of October 23, 2025, for election submission requires timely action from participants.

Risks

• The exact timing for the merger completion cannot be guaranteed, as it is contingent on regulatory approvals and other closing conditions.
• Proration mechanisms mean that the final mix of cash and stock received by ESOP participants may differ from their initial election.
• There is a potential delay of up to 12 months (around October 2026) for ESOP participants to become eligible for distributions, pending an IRS determination letter.
• Participants will face tax consequences upon taking an ESOP distribution, necessitating consultation with a tax advisor.

Future Outlook

The merger between Eastern Bankshares and HarborOne Bancorp is anticipated to be completed on October 31, 2025, contingent on receiving all necessary regulatory approvals and satisfying other closing conditions. ESOP distributions are expected to become eligible around October 2026, following the IRS's issuance of a favorable determination letter on the ESOP termination.

Management Comments

• Eastern and HarborOne share deep local roots and a strong commitment to their colleagues, their customers, and the communities they serve.
• HarborOne and Eastern anticipate that the merger will be completed on October 31, 2025, assuming receipt by then of all regulatory approvals and satisfaction of other closing conditions.
• HarborOne and Eastern cannot predict or guarantee the exact timing for completion of the merger.

Industry Context

This filing is highly specific to the operational details of an employee stock ownership plan within the context of a bank merger. It reflects standard procedures for integrating employee benefits during M&A in the financial services sector, focusing on compliance and participant communication rather than broader market trends or competitive dynamics.

Stakeholder Impact

• Shareholders (HarborOne ESOP participants): Will exchange their HarborOne shares for Eastern stock, cash, or a mix, subject to proration. Distributions will be delayed until IRS approval of ESOP termination.
• Employees (HarborOne ESOP participants): Direct impact on their retirement savings held in the ESOP, requiring active election and understanding of tax implications.

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 merger consideration elections by October 23, 2025.
• HarborOne to apply for a favorable determination letter upon termination of the ESOP with the IRS.
• Merger completion anticipated on October 31, 2025, subject to regulatory approvals.
• Principal to send distribution packages, including an IRS Special Tax Notice, when participants are eligible for ESOP distribution.
• Participants advised to consult a tax advisor regarding ESOP distribution elections.

Key Dates

Keywords

Eastern Bankshares, HarborOne Bancorp, Merger, ESOP, Employee Stock Ownership Plan, Stock Consideration, Cash Consideration, Proration, SEC Filing, Corporate Action, Financial Services, Banking