In what may be the opening shot in a thrift merger war on New York's Long Island, Astoria Financial Corp. has approached Long Island Bancorp with a $1.3 billion merger feeler, local banking sources said.
Astoria Financial, based in Lake Success, N.Y., made an informal $55- per-share offer last week, and Melville-based Long Island Bancorp came back early this week with a counterproposal of about $60 per share, said executives familiar with the matter.
Analysts say an overture at that price probably did not include another $10 a share an acquirer would be expected to pay Long Island Bancorp in anticipation of a damage award from the government for changing the accounting for Long Island Bancorp's acquisition of failed thrifts in the 1980s. Including such a proviso, the deal would be worth $1.6 billion.
Shares, which have surged close to the $55 level, ended the day Tuesday at $53.875.
Long Island Bancorp, with $5.9 billion of assets and 35 branches, could be a trophy property as a handful of larger institutions angle for leadership positions on the 100-mile-long island of suburb and resort towns east of New York City. Suburban Long Island boasts a mostly affluent population of 2.7 million.
The offer came one week after North Fork Bancorp, also of Melville, filed to increase its stake in Long Island Bancorp to 9.9%, a move that could portend a competing bid by North Fork.
Astoria Financial's chairman, George L. Engelke, declined to discuss whether his institution has made an offer. But he did indicate that an operation like Long Island Bancorp would fit Astoria's expansion plans.
"We're in-filling right now," said Mr. Engelke, whose operation has 61 branches and $10 billion of assets. "Consolidation makes you much more efficient and that's what we want," he said.
Roger Teurfs, senior vice president at Long Island Bancorp, would not comment on the possible offer. The thrift company, which operates Long Island Savings Bank, continues to conduct business as usual and does not "make it a practice to discuss rumors," Mr. Teurfs said.
A formal announcement may not be forthcoming for some time, if at all, analysts said. Banks do not have to report informal overtures by another institution, but must make public any agreements that both sides have signed.
Analysts say the teaming through a friendly deal with Astoria Financial would make sense given the pressures Long Island Bancorp faces from $9.9 billion-asset North Fork Bancorp, an aggressive acquirer and consolidator of local banks.
North Fork chairman John Kanas declined to discuss his bank's long-term plans for its investment in Long Island Savings. But as a shareholder, North Fork is in position to agitate for a higher price or make its own move to acquire-a strategy it has employed in the past.
Astoria Financial has demonstrated its own expansion bent, with purchases within the past two years that include $2.5 billion-asset New York Savings Bank.
The Long Island scene offers a microcosm of what is going on nationwide among banks, with the institutions experiencing pressures to buy or be bought.
"We certainly are heading toward consolidation in the Long Island marketplace," said Thomas F. Theurkauf at Keefe, Bruyette & Woods Inc.
Long Island Bancorp also offers value as a northeastern mortgage company whose offices extend into Georgia. "They have a very attractive franchise," Mr. Theurkauf said.