BNC Deal in N.C. Shows Timing's Importance with M&A

Timing is everything when it comes to bank mergers.

That message was reinforced recently, when BNC Bancorp (BNCN) in High Point, N.C., filed notice of a shareholder meeting needed to approve its pending purchase of South Street Financial (SSFC) in Albemarle, N.C.

South Street had abandoned plans in August to conduct a private placement after its board, with help from management and an outside financial advisor, determined that it would be difficult to sell stock at a target price of $5 a share. In October, the $274 million-asset company hired Raymond James to "informally contact" potential acquirers to gauge interest and provide intelligence into merger considerations.

Raymond James never got around to contacting potential suitors. On Oct. 31, an investment banker representing BNC walked into the office of Ron Swanner, South Street's chairman and chief executive, to see if he would be willing to discuss a merger with Rick Callicutt, BNC's president and CEO.

"After meeting with members of management and various directors, Mr. Swanner directed Raymond James to contact Mr. Callicutt to open discussions," the filing states.

The negotiations also show that it makes sense to haggle, even if it involves relatively small amounts of cash. BNC originally offered South Street $8.75 a share — 80% stock and 20% cash. Less than a week later, South Street asked for $8.85 a share and 'the establishment of reasonable exchange ratio collars."

BNC agreed. The haggling netted South Street's shareholders an additional $268,000.

The companies announced the merger on Dec. 18, coinciding with BNC's agreement to buy another North Carolina bank, Community First Financial Group in Chapel Hill.

The regulatory filing makes no mention of Mark Jaindl, a Pennsylvania banker who unsuccessfully attempted to take over South Street's board last spring. Jaindl, who owns about 22% of South Street's common stock, has indicated that he will support the merger.

South Street's shareholders will meet March 28 to vote on the proposed sale.