People's United Financial Inc said it agreed to buy Financial Federal Corp for about $738 million in stock and cash to boost its equipment financing businesses.

The deal values Financial Federal at $27.74 a share, a premium of 35 percent to the stock's Friday close of $20.55.

Financial Federal shares jumped 37 percent before the bell, while those of People's United rose 4 percent.

People's United, one of the better-capitalized banks in the United States, said it expects the deal to add significantly to its operating profit in 2010, and have a slight positive impact on its capital levels on a pro forma basis.

Financial Federal is a leader in equipment financing and provides a valuable complement to our existing business lines, particularly, People's Capital and Leasing, our equipment financing subsidiary, People's United Chief Executive Philip Sherringham said in a statement.

Financial Federal shareholders will receive $11.27 in cash and one People's United common share for each share held.

The Bridgeport, Connecticut-based company, which was added to the S&P 500 Index .SPX last November, has been saying it was seeking acquisitions as it had a massive cash reserve of $2.5 billion. (Reporting by Anurag Kotoky in Bangalore; Editing by Deepak Kannan)