Bradford Bancorp Inc.'s planned acquisition of another Baltimore-area thrift company is in danger of collapsing, because the buyer has failed to sell enough shares in its initial public offering to fund the deal.
The $578 million-asset Bradford announced in March that it would acquire Patapsco Bancorp Inc. in Dundalk, Md., for $45.5 million in cash and stock, and that it would convert from a mutual thrift to a stock-owned company to raise the money to fund the acquisition. At the time Bradford said that it would pay Patapsco shareholders $23 a share or exchange 2.3 shares of its stock for each Bradford share.
Late Thursday, Bradford announced that it would not be able to close the deal unless the $257 million-asset Patapsco agreed to a "significantly" lower price. Bradford said that it is unlikely to sell the minimum number of shares to complete its IPO unless its valuation is lowered, and that doing so would reduce the number of shares it could sell.
Patapsco's board "is currently considering the proposal, as well as its rights under the merger agreement, and will take such actions as it believes are in the best interests of shareholders," Bradford said.
It also said that either party could terminate the deal if it is not completed by March 19.
If the deal is terminated after that date and Bradford still has not completed its public offering, then it would have to pay a $2 million termination fee.
In late trading Thursday, Patapsco's stock had dropped nearly 11% from Wednesday's close, to $15 a share.
Bradford's announcement was made just two days after another Baltimore thrift company said that it has put its planned public offering on hold as a result of weak demand for its shares. The $645 million-asset BCSB Bankcorp Inc. said Tuesday that it would return to subscribers any funds it has raised to date, and that it would ask an independent appraiser for a revised valuation.
