Ending a six-month standoff between two Southern California institutions, San Diego-based Bank of Commerce has withdrawn its offer to buy Fallbrook National Bank.
Bank of Commerce backed off because its own stock price-now trading at about $23 a share-has soared roughly 150% since the deal was proposed in February. The price increase makes the offer now worth six times book value.
"At the present value of Bank of Commerce stock, a merger under the original terms is no longer attractive or of interest to Bank of Commerce," Peter Q. Davis, its chairman and chief executive officer, said Tuesday.
Bank of Commerce will pursue other opportunities, including a possible acquisition by a larger competitor, he said.
Mr. Davis criticized Fallbrook's board of directors for refusing to let shareholders vote on his offer.
"We had hoped that as our stock price appreciated relative to Fallbrook's, it would be grounds for their board to call a special shareholders meeting to discuss our offer," Mr. Davis said. "They have not."
Bank of Commerce, the nation's largest Small Business Administration lender, offered in February to buy Fallbrook for stock then worth about $26 million-around 2.5 times book value. The bank, with $470 million of assets, went after $97 million-asset Fallbrook for its wealthy Northern San Diego County deposit base, as a funding source for loans.
Fallbrook's management rejected Bank of Commerce's hostile bid on the grounds that a takeover would strip the retiree town of Fallbrook of its only community bank. They also maintained that Bank of Commerce's stock was overvalued.
"We are very pleased" that Bank of Commerce withdrew its offer, Fallbrook president Thomas E. Swanson said. "We feel it's been a dead issue for a long time. We see Fallbrook having tremendous growth in the next few years, which is going to bring tremendous value to our shareholders."
But one analyst said that given the increase in Bank of Commerce's stock price, the Fallbrook board's steadfast refusal to call a meeting may not have been in the best interest of shareholders.
"In retrospect, from where the Bank of Commerce's shares have gone since then, it would have been a wise move," to accept the offer, said Hans Schroeder, a bank analyst at Torrey Pines Securities in San Diego.
Bank of Commerce shares have climbed from about $9 in late February. Fallbrook shares are trading in the $7.50 range, roughly $2 above the February share price.