Shortly after announcing plans to acquire Sandwich (Mass.) Bancorp last month, CompassBank president Kevin G. Champagne received a telephone call welcoming him to Cape Cod.

It was from Stephen B. Lawson, president of Cape Cod Bank and Trust Co., Sandwich Bancorp's chief rival. The two-who barely know each other-even talked about getting together for lunch, said Mr. Champagne.

But the budding friendship was short-lived.

Less than three weeks later, on Feb. 17, Cape Cod Bank made an unsolicited $125 million offer for Sandwich, topping CompassBank's bid by $15 million.

Then, within days, two other Massachusetts companies-Firstfed America Bancorp in Fall River and Rockland's Independent Bank Corp.-submitted their their own offers for $519 million-asset Sandwich.

Now, an all-out bidding war has broken out on rustic Cape Cod, with the initial solicitor, New Bedford, Mass.-based CompassBank, going so far as to hire a high-powered New York law firm to keep alive its hopes of acquiring the 112-year-old institution.

"I don't think there's any question that what we're seeing is highly unusual at the community bank level," said Robert Powers, a Providence, R.I., bank consultant.

One suitor, Independent, withdrew its bid late Friday. Officials at the $1.3 billion-asset company would not comment on the decision.

Which of the others will emerge as the new owner of Sandwich is now up to the bank's board of directors.

Senior vice president Dana Briggs said Sandwich's board is considering all offers, but he declined to name a front runner or say when a decision would be made. Asked if remaining independent was an option, Mr. Briggs replied, "The likelihood is small."

Why the sudden interest in Sandwich?

Observers cite a host of reason, the most significant of which is the bank's spot on the map. All the potential acquirers are based in or adjacent to Sandwich's market area.

"Sandwich Co-Op has a very nice franchise and distribution system on Cape Cod," Mr. Powers said. "It fills a place in the market that all of these institutions have an interest in serving."

No matter which offer is accepted, Sandwich shareholders stand to be richly rewarded.

Before CompassBank made its all-cash, $53-per-share offer, Sandwich's stock was trading at about $43. At midday Friday it was trading at $57.75, an asking price analysts still believe would be too low.

"People are fooling themselves if they think the offer is going to stay at $53 a share," said Bernard J. Doherty, senior vice president at Josephthal & Co. in Boston. Cape Cod offered $60 per share, and First Fed's offer has not been made public.

In an interview, Mr. Champagne indicated that CompassBank would consider increasing its offer. CompassBank, a mutual thrift with $1.1 billion of assets, plans to raise the funds by selling 49% of its stock in a public offering.

"We know what we have the capacity to pay, and we're prepared to go to that level, but not beyond," Mr. Champagne said.

Cape Cod Bank's Mr. Lawson said he could not comment on his company's plans. Robert F. Stoico, president of $1.1 billion-asset Firstfed, did not return telephone calls.

Though plainly stunned at the ferocity of the battle-namely CompassBank's decision to bring in the law firm Skadden, Arps, Slate, Meagher & Flom-analysts and consultants are not surprised that Sandwich has emerged as a hot property.

Gerard S. Cassidy, senior vice president, equity research, at Tucker Anthony & Co. of Portland, Maine, said community banks must be on the lookout for strong franchises to drive revenues higher and satisfy shareholders.

Others say Sandwich is simply a good geographic fit.

Hyannis-based Cape Cod Bank, with $981 million of assets, is already the dominant player on Cape Cod, and the Sandwich acquisition would only strengthen its position.

"This would give them a monopoly on the Cape," Mr. Doherty said.

CompassBank and Firstfed are based in southeastern Massachusetts, and a Sandwich acquisition would allow them to contiguously extend their reach into an area where they have no presence.

Still, CompassBank's Mr. Champagne said he believes his bank, as the original bidder, "is in the driver's seat." Under terms of the definitive agreement signed Feb. 2, Mr. Champagne said Sandwich must give CompassBank the option of matching any offer.

He also questioned why Sandwich shareholders would consider merging with the other bidders when only CompassBank was offering all cash.

"What they're offering is paper," Mr. Champagne said. "The question shareholders need to be asking is 'Can I convert that piece of paper into value?'"

But Tucker Anthony's Mr. Cassidy said that given a choice, he would rather receive stock than cash.

"With cash, there are tax implications," Mr. Cassidy said. Besides, he added, if shareholders accept a stock offer, "they have the potential of being taken over down the road at a much higher price."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.