Hamilton Bancorp appears ready to terminate its $139 million merger pact with New York Bancorp, fueling talk that it may be considering alternative bids.
Last week, Hamilton warned it would scuttle the deal unless New York Bancorp, the holding company for Home Federal Savings Bank, increased the stock ratio in the contract.
But because Hamilton's stock has fallen 20% since the July 1994 agreement while thrift takeover activity has stalled, observers questioned why Hamilton would reject a deal that pays a 20% premium to its current stock price.
Hamilton did not return calls seeking comment.
One source noted that other thrifts have bid for Brooklyn-based Hamilton, speculating the $741 million asset company may be hoping to get a better deal.
Earlier this month, Hamilton hired McConnell, Budd & Downes Inc. to replace its previous investment adviser, Adams Cohen, which folded in November.
The agreement gives Hamilton the right to demand more than 1.6 New York Bancorp shares for each Hamilton share if the acquirer's stock falls below $19.69. The shares have been below that level since Sept. 26.
At New York Bancorp's current price, Hamilton shareholders would have to get 1.82 shares for each of their own shares in order to reach the deal value of $31.50 which C. Edward McConnell, managing director at McConnell Budd, insists is the least Hamilton will accept.
One critic said that Hamilton has failed to recognize the implications of the recent sharp downturn in thrift prices.
New York Bancorp's stock is not far from the collar - or the price at which Hamilton would have to consummate the deal - so a slight surge would solve the problem, the critic said.
The company has until Thursday to meet Hamilton's demand, or reject the deal.
New York Bancorp president and chief executive Michael A. McManus appears willing to walk away from the deal.
"Our concern is we have a very strong institution, and we value our ability to do a transaction for value," he said Friday. "But it won't be beneficial to our shareholders if it is dilutive.
"Clearly the values of all New York thrifts have come down," he added. "We felt they should have been willing to take it."
