North Fork Paying $47M For Long Island Unit of Spain's Banco Exterior

A Spanish bank that had planned to spin off its domestic banking subsidiary on New York's Long Island through a public offering is instead selling it to a local banking company for $47 million in cash.

Mattituck-based North Fork Bancorp, which has $2.9 billion of assets, agreed last week to pay 157% of book value for the domestic commercial banking business of Extebank, the Stony Brook subsidiary of Banco Exterior de Espana SA, Madrid.

Banco Exterior will retain its international banking operations at its New York City office.

The in-market deal would give North Fork a strong loan portfolio of $250 million at a time "when good loan volume is at a premium," said John Adam Kanas, president and chief executive of North Fork.

"We think this is perfect timing for us," Mr. Kanas said.

"Extebank tended to serve the exact kind of commercial market that North Fork does," he added. "We know many of their depositors and borrowers personally, and think that the transition from doing business with Extebank to doing business with North Fork will not be difficult."

Officials of Banco Exterior and of $442 million-asset Extebank had been working since May with an investment adviser on a draft prospectus to take the subsidiary public and make it independent, bank officials confirmed.

The current domestic management would have remained in place, said Marco A. Garcia, chairman and chief executive of Extebank. But the plan did not involve a management buyout, and the current executives would not necessarily have become directors, Mr. Garcia said.

A source familiar with the situation said the the North Fork deal was a disappointment to Extebank's local management. "A significant amount of time and effort had been spent developing the prospectus and developing a viable business plan," the source noted.

But the North Fork offer beat what the stock was likely to fetch on the open market, this source said.

Sources said Banco Exterior officials had been hoping to raise an amount in the low $40 million range, but North Fork came through with the higher offer just as Banco Exterior and its advisers were planning to submit the prospectus to the Securities and Exchange Commission.

Mr. Garcia explained that officials at Banco Exterior, which had long maintained its international banking operation and the Long Island community bank "under one roof," had determined that the two "didn't fit very well together."

The Spanish parent had also entertained offers from several other institutions, Mr. Garcia said, and even considered keeping Extebank in its present status as a separate subsidiary.

The deal, subject to regulatory approval, is expected to be completed in the first quarter of 1996.

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