Seeking to break into Florida, Union Planters Corp. has agreed to buy Miami-based Capital Bancorp, a $1.9 billion-asset company that has been engulfed in controversy.
Memphis-based Union Planters agreed to pay $358 million in stock for Capital, which has 28 offices in southern Florida.
The deal, which is valued at a relatively modest 2.45 times book, gives Union Planters its first entry into retail banking in the Sunshine State and a strong position in international trade finance.
But it also throws Union Planters into the middle of a tempestuous battle between some Capital shareholders and the powerful Miami family that controls and runs the company.
"Union Planters got a very good price," said Kenneth Thomas, an independent Miami-based bank consultant and analyst. "But there is a lot more here than meets the eye."
Analysts said the deal could face several snags as its moves forward because of the dispute. Indeed, the unhappy shareholders are already questioning whether the Union Planters price fairly compensates them.
The shareholders have tried for years to oust members of the Holtz family from the company it founded in 1974. The shareholders claim the family, which owns 56.7% of Capital, has mismanaged the company and allocated funds improperly.
Earlier this year, Florida banking regulators ordered Daniel Holtz, current chairman and CEO; Fana Holtz, vice chairwoman; and Javier Holtz, chief credit officer, to give up control of the company. That order is due to take effect in September.
The family's patriarch, Abel Holtz, resigned three years ago amid legal troubles and was banned from the company by federal regulators last year.
The $15 billion-asset Union Planters, which has built a seven-state banking empire by acquiring small companies throughout the Southeast, has a history of maintaining the management teams of its acquired institutions and allowing them to operate independently.
As a result, many analysts said it appeared Capital Bancorp sought out Union Planters specifically so the Holtz family could keep a hand in running the organization.
But shareholders, who have a $50 million lawsuit pending against the Holtz family, have made it clear they will protest any deal that leaves the Holtz family in the company.
Officials with both Union Planters and Capital Bancorp said it has not yet been determined whether or not the Holtz family members will continue to manage the bank after the sale.
"That issue has not been fully discussed, but I know Daniel Holtz is firmly committed to making sure this deal gets done," said Tim Harris, Capital Bancorp's chief financial officer.
Eugene E. Stearns, a Miami attorney representing the shareholders, said he is investigating whether or not the Union Planters bid was the best one offered for Capital Bancorp.
The shareholders he represents will push for a better price, he said, either in terms of another bid or an allocation of proceeds that rewards the non-Holtz shareholders but not the Holtz family.
Union Planters declined to discuss the matter.
The Memphis company has long had its eye on the fast-growing Florida economy, analysts said.
"This gives them something they've been looking for at least the last two years," said R. Harold Schroeder, an analyst with Keefe, Bruyette & Woods.
Union Planters said it was especially drawn by the international trade opportunities
"That is one of the main things that attracted us to them," said Bill Andrews, a Union Planters spokesman.
International banking accounted for about $9.9 million in revenues at Capital Bancorp in 1996 and amounts to about 12% of total loans, according to Mr. Harris. Between 20% and 25% of consolidated pretax earnings are derived from the international banking business, which involves confirming letters of credit issued by correspondent banks in Latin America; short- term trade refinancing; export-related loans and private banking initiatives.
Capital also owns 81% of a nationwide factoring company.
Terms of the deal call for Union Planters to exchange .8525 shares of common stock for each common share of Capital Bancorp. Based on Union Planters closing price on Aug. 12, shareholders of the Miami company would receive about $43 a share in the tax-free exchange. The deal is expected to close in the first quarter of 1998.
The company expects to take a charge of between $10 and $12 million for the acquisition. Projections call for about 15% cost reductions over two years. the company said the deal would be accretive to earnings next year.
The deal is conditioned upon a 30-day due diligence period and termination rights if Union Planters stock falls by 20% and underperforms a peer index by 15%.
