Looking to diversify as the economy in its home state remains sluggish, Bancorp Hawaii said on Tuesday it plans to buy a California community bank in a stock transaction valued at $183 million.
The deal, at 1.98 times CU Bancorp's book value, would be Bancorp Hawaii's largest acquisition to date and would create a launching pad for further West Coast acquisitions.
The Encino-based target, primarily a middle-market lender, has $844 million of assets and operates in the Los Angeles area as California United Bank.
"This is really to round out our Pacific Rim strategy," said Bancorp Hawaii chairman and chief executive Lawrence M. Johnson. "For the last year or so, we've been wanting to gain a presence in California."
Mr. Johnson said he was most interested in Los Angeles because of the number of businesses there that trade with Asia. In addition to being a commercial lender, the parent of Bank of Hawaii hopes to extend its trade finance services to West Coast businesses.
Honolulu-based Bancorp Hawaii, with $14 billion of assets, has 160 branches spread through Asia and the Pacific, but only six on the U.S. mainland-all from a 12-year-old acquisition in Arizona.
Over the past 35 years Bank of Hawaii has planted its flag in such outposts as Tahiti, New Caledonia, Fiji, and American Somoa.
The California deal would complement the purchase of four Arizona branches, with $270 million in deposits, which Bancorp Hawaii has recently agreed to buy from H.F. Ahmanson & Co. That transaction is expected to close next month.
As reported on Tuesday, Bancorp Hawaii plans to change its name to Pacific Century Financial Corp. in April. It will continue to operate as Bank of Hawaii in its home state, but will use the Pacific Century name in California, Arizona, and elsewhere.
"To round out that whole international strategy the piece that needed to be shored up was the U.S. mainland," said Joseph K. Morford, an analyst with Alex. Brown & Sons. "This is the first step to build a presence in the U.S. mainland."
At 15.8 times estimated 1997 earnings, the transaction seems in line with other California bank deals, Mr. Morford said. Moreover, the company would gain the expertise of CU Bancorp chief executive Stephen G. Carpenter, who led a turnaround after arriving from Security Pacific Corp. in mid-1992.
Last year, the company more than doubled in size through the acquisition of $435 million-asset Home Interstate Bancorp in Signal Hill, Calif.
Thomas McCandless, an analyst with Natwest Securities Corp., said the deal to buy CU Bancorp falls in line with Bancorp Hawaii's strategy. Mr. McCandless described CU Bancorp as a "good little bank with a strong middle-market business." The deal was "no major surprise," he added.
Bancorp Hawaii officials said the transaction should make it easier to do future deals.
"We don't view this as an individual acquisition," said Bancorp Hawaii vice chairman Thomas C. Leppert. "As we look to the future we think we'll get considerable cost savings from merging (other) operations with California United," he added.
Formerly an executive at Castle & Cooke, the Hawaiian agricultural and land developer, Mr. Leppert arrived at Bancorp Hawaii in December. He is spearheading the bank's mainland acquisition strategy.