Two Ohio banking companies are taking the unusual step of buying a third bank while still working on their own merger.
The $191 million deal announced late Wednesday calls for Salineville- based Citizens Bancshares to exchange 63.25 shares of its stock for each share of Ohio Bank, Findlay.
The Ohio Bank deal is expected to close in late November, about a month after Citizens completes its merger of equals with Mid Am Inc., Bowling Green. The three banks combined would form Ohio's seventh-largest, with $4.6 billion of assets.
Marty E. Adams, president and chief executive officer of $1.8 billion- asset Citizens, said acquiring closely held Ohio Bank was an opportunity the bigger merger partners could not pass up.
"You always have to act when you get the opportunity," he said. "We have two great companies, and now we're going to add a third."
The deal price is 3.7 times $600 million-asset Ohio Bank's book value and 30.32 times its earnings in the 12 months through March. The acquisition is expected to be accretive to the yet-to-be-named new company's earnings by the end of 1999.
Ohio Bank is based in western Ohio, about 30 minutes south of Mid Am's headquarters and has 18 branches in rural and suburban areas throughout the region.
Ross A. Demmerle, a bank analyst at McDonald & Co. Investments, Cleveland, called the Ohio Bank acquisition a "perfect fit" with the combined Citizens/Mid Am company's market area.
Citizens is based about an hour west of Pittsburgh, with operations in eastern Ohio and western Pennsylvania, while Mid Am's six banks are dispersed throughout western Ohio.
David R. Francisco, Mid Am's president and chief operating officer, said Ohio Bank's branches would fill in some gaps between existing Mid Am branches and lend some economic stability to the company.
Ohio Bank's "market area is almost recession-proof," Mr. Francisco said.
The companies are to merge two Mid Am bank subsidiaries and five Mid American National Bank and Trust Co. branches into Ohio Bank as part of $4 million in planned cost savings. The move would double Ohio Bank's assets, to $1.2 billion.
Ohio Bank will retain its name and much of its leadership, including chairman Richard R. Hollington Jr., whose family controls more than 50% of the bank's stock. Keeping Ohio Bank intact was a key reason the Hollington family chose to sell to Citizens and Mid Am, said Richard R. Hollington 3d, Ohio Bank's chief operating officer.
"We could have gotten a higher price for the bank if we had sacrificed our employees and our marketplace," he said. Mr. Hollington said he is not concerned about Ohio Bank's getting lost in the shuffle as Citizens and Mid Am join forces. "We think we've got an opportunity to shape a $5 billion business," he said.
Mr. Adams and Mr. Francisco, whose banks have completed about 30 acquisitions over the past 10 years, said they are not ruling out additional deals.
"We are prepared to grow when we see another opportunity," Mr. Adams said. "But we're not going to take our eye off the ball on the Citizens-Mid Am merger or the Ohio Bank deal."