Renewed takeover speculation surrounding Florida thrifts in the wake of this week's sale of American Savings of Florida may be misguided.
First Union Corp. paid an unusually low core deposit premium for the Miami institution earlier this week, prompting one observer to assert that the high-flying takeover prices once enjoyed in the Sunshine State are coming back to Earth.
Although some unique factors were at play in the American Savings sale, this observer said the low 4.66% premium meant the takeover premiums built into some of the state's thrift stock prices already are too high.
Despite the low premium, the First Union deal appeared to rekindle takeover speculation, boosting the share prices of two Florida thrifts rumored to be takeover targets.
Coral Gables Fedcorp and First Palm Beach Bancorp have risen more than 8% since the deal.
"American Savings is like the RJR of the leveraged buyout world; in other words it is the last deal for a long time," said the contrarian observer, who requested anonymity.
"American Savings was a bellweather," he added. "As evidenced by the low core deposit premium, which pales in comparison to the other premiums paid for larger institutions in Florida, the perspective one could say is that the sellers did not meet their expectations."
Earlier this year, out-of-state banks like Michigan-based First of America Bank Corp. were eagerly buying in Florida in an effort to follow retirees moving there.
But as prices plunged in the last few months, activity stalled.
First Union agreed to pay $253 million in stock, or $21 a share, for American Savings. The thrift finished yesterday at $19.50, up 19% since the close of trading Friday.
Early last month American Savings, which gained notoriety in the 1980s for being ensnared in Michael Milken's junk-bond debacle, broke off negotiations with First Union.
But the thrift was under pressure to sell because its main shareholder, former Milken client Enstar Group Inc., is under court order to shed its 48% holding in the thrift by the middle of next year.
And First Union was essentially the only buyer in town, the market observer said.
The stock prices of the main acquirers in Florida -- Barnett Banks Inc., AmSouth Bancorp., and PNC Bank Corp. -- are all near their 52-week lows, he said.
And NationsBank Corp. has antitrust concerns in the state and has been pursuing a fill-in strategy.
That left First Union, which knew its enviable position and received the best price, the observer said.
American Savings was advised by Goldman, Sachs & Co.
More than one analyst argued that the renewed takeover speculation is perfectly appropriate.
Because of Enstar's legal requirement to sell, the price was in no way a harbinger of prices the other targets might command, said M.G. Sanchez, a managing director of T. Stephen Johnson & Associates Inc., an investment bank in Pompano Beach.
"It is a unique situation," he said. "Everybody should be pleased given the circumstances."
In fact, Deborah Beylus of J.W. Charles Securities Inc., Boca Raton, said American Savings got a great deal from First Union. And as a result, she added, "people are raising their eyebrows to the remaining Florida thrifts."
However, the management of Coral Gables and Palm Beach are young and do not want to sell, the market observer said.
The out-of-state banks may not come until after Florida's interstate banking law takes effect next May, said Erwin Katz, senior vice president of investments at Robert W. Baird & Co., Milwaukee
And another $1 billion asset thrift, Home Savings Bank, a unit of Hollywood-based Home Financial Corp., is a recently converted mutual thrift, and thus cannot legally be sold at least until the end of next year.
One thrift all parties agree will not be sold is the state's largest, CSF Holdings of Miami, which is majority owned by the Stuzin family.
Either way, the price paid for American Savings may give some local thrift and bank boards pause before deciding to sell.
A Florida Bargain?
Premiums paid for core deposits in Florida bank dealsAcquirer/target PremiumFirst Union Corp./ 4.66%American Savingsof FloridaPNC Bank Corp./ 10.78%Indian RiverFederalFirst National 6.19%Bancorp/FF BancorpAmSouth/ 7.19%Fortune Bank
Source: SNL Securities