The battle to buy Great Eastern Bank in New York intensified Monday as one of its two California suitors increased its offer.
Cathay General Bancorp of Los Angeles said it would pay $112 million, or about $8.7 million more than UCBH Holdings Inc. of San Francisco agreed Oct. 13 to pay. The $310 million-asset Great Eastern had sought out UCBH as a "white knight" to counter Cathay's initial foray.
In early September, Cathay announced that it had entered into option agreements to buy a 41% stake in Great Eastern for about $28.4 million with the intention of negotiating with the rest of the shareholders to buy the remaining stock.
The end run angered Great Eastern's management, but its tone softened considerably Monday.
"Obviously we have two banks that are competing," said William J. Laraia, Great Eastern's chief executive officer. The board is "evaluating the whole thing at this point," he said.
"We have a responsibility to our shareholders, and we'll be discussing … [Cathay's] offer," Mr. Laraia said.
In a press release Oct. 13, the same day UCBH made its offer, Great Eastern revealed that it had invited offers from other bidders, including Cathay. But Great Eastern had expected interested parties to negotiate with the board, not individual investors.
Great Eastern called Cathay's piecemeal bid a violation of the "ground rules" it had established. It filed a protest with the Federal Reserve Board.
On Friday, Dunson K. Cheng, Cathay's chairman, president, and CEO, said the $6.2 billion-asset company would exercise its options to buy a 41% stake in Great Eastern upon regulatory approval and would oppose its deal with UCBH. Under New York law, any merger deal requires the approval of two-thirds of Great Eastern shareholders.
In a press release Monday, Thomas S. Wu, UCBH's chairman, president, and CEO, said only, "We believe that providing any additional comment on this situation would be inappropriate."
The stakes are high for both Cathay and UCBH.
In California, competition between the Chinese-American banking companies has become particularly fierce, as they all fight for the same deposits and commercial real estate deals.
Consequently, they are expanding into other cities with large Chinese-American populations. Great Eastern - with five branches in the biggest of them outside California - is a huge prize.
"I don't think we've seen the end of it," said Joseph Gladue, an analyst at Cohen Brothers & Co. in Philadelphia. "Both UCBH and Great Eastern face some reputation risk."
UCBH's offer of $60 a share is 3.4 times book, and Cathay's offer is 3.6 times book. "You don't see those multiples a whole lot," Mr. Gladue said.
(Cathay said that its offer would be reduced by the value of any breakup fee that Great Eastern would have to pay UCBH to terminate their deal.)
James Abbott, an analyst at Friedman, Billings, Ramsey & Co. Inc. in Arlington, Va., wrote Monday that he was concerned that if Cathay succeeded in what he considers a hostile takeover bid, it could not maintain good relationships with Great Eastern's management.
"Banking is a highly relationship-driven business, especially in the areas of commercial and trade-finance lending, a particular area of expertise for" Cathay, Mr. Abbott wrote in a research note. "We are cautious in our outlook that … [Cathay] would be able to retain the attractive customer relationships that are potentially linked to and serviced by members of the [Great Eastern] board or other upper-level management."
However, if the two managements could work together, the merged bank would have higher lending limits and a wider variety of products, Mr. Abbott noted.
