LAS VEGAS -
Bob Hoel, the Filene Fellow In Residence at the Filene Research Institute, followed a spirited attack upon the "hostile takeover" attempt of Continental FCU by Wings Financial by CFCU CEO Tom Glatt by noting, "I have a somewhat different view."
"I was initially outraged," Hoel said. "I thought this was rather unconscionable, rather unscrupulous. But the facts have made me mellow my views."
Rather, Hoel told the National Directors Conference here that after further review he had come to see an almost "perfect merger opportunity."
Hoel cited the fact both credit unions serve the airline industry, there were great opportunities for efficiencies of scale, and both CUs have extensive branch networks around the country, yet with little overlap. Moreover, said Hoel, the numbers made it clear Continental was not growing or serving its membership. Continental FCU had closed 2006 with a loan ratio of 33%, and just 35% of members were borrowing from the CU. It was below peer group on rates on both sides of the ledger. "And this credit union was absolutely loaded with capital," Hoel said. "If you think about capital the way we should think of it, which is capital to assets at risk, it was a 51% capital ratio. This was a very interesting situation."
The other great issue in the Continental/Wings Financial debate, said Hoel, is that "the Continental FCU board denied the members the right to vote on this merger. Continental FCU was really effective at stirring everyone up. The members of CFCU should say thanks to Wings Financial. Today they have a better credit union. The second thing is the best defense against a hostile takeover is to serve your members very well and give them value. What's wrong with the member gathering the facts and having the right to vote on a merger offer? Are we so afraid of the member? If you're really serving your members they are not going to merge or convert (to bank charter)."
Noting he is a CU board member himself and a past chairman, Hoel said that the possibility of a hostile takeover brings discipline to the board. "They learn that if they are not doing the best things for their members, someone else will approach them," he said.
