CHICAGO -- Avondale Federal Savings Bank last week scrapped plans for a public offering in favor of a merger conversion with an Iowa thrift that some depositors are calling a bad deal.

In agreeing to sell out to privately held Central Resource Group, an insurance and financial services holding company based in Des Moines, Avondale angered depositors who argued they could have gotten a better deal by taking the Chicago-based company public.

Terms of Deal Outlined

"This deal is road kill being packaged as a mink coat," said Linda Stromberg, an Avondale depositor and a thrift analyst at Howe Barnes Investments, Chicago. "No one is looking out for the depositors."

But Avondale officials said they explored a stand-alone conversion and spoke with numerous other banks before agreeing to be acquired by Central Resource Group.

Under the terms of the transaction, Avondale will be merged with Midland Savings Bank, Central Resource Group's $953 million-assets thift.

Avondale depositors and employees will be offered first crack at Central Resource stock, which will then be offered to depositors of Midland before going public later this year or in early 1994.

Central Resource is the parent company of Iowa's largest residential real estate company and largest residential mortgage originator. The company has a loan origination office in a Chicago suburb.

An 'Excellent Opportunity'

"The merger with Avondale represents an excellent opportunity to expand our franchise in the Midwest," said Alfred P. Moore, president of Central Resource.

"We are going to build a very significant integrated financial services company," said Robert S. Engelman Jr., who will become president of the merged savings and loan, which will have assets of $1.47 billion and will be based in Des Moines.

But some depositors are crying foul. They say that Avondale's management -- by forgoing a stand-alone stock conversion -- has stripped them of a possibly lucrative crack at the company's stock before it trades on the market.

Chronology of Transaction

Avondale announced in April that it had asked financial advisors Charles Webb & Co., Columbus, to help it explore a stand-alone conversion.

The company also contracted with Hovde Financial, a Washington-based firm that assists financial institutions in finding mergers and acquisitions partners.

Hovde introduced Avondale to CRG and as many as 15 other banks and thrifts possibly interested in merging, said Steven D. Hovde, head of the firm's Chicago office.

Avondale officials then compared the benefits of the Central Resource merger with a stand-alone conversion, and decided on the former in consultation with Charles Webb.

While officials say they have not yet determined who will underwrite the Central Resource stock offering, the company has a long-standing relationship with Chicago Corp. Charles Webb & Co. also has a informal revenue-sharing agreement with the investment banking firm.

The merger conversion is subject to approval from the Securities and Exchange Commission and the Office of Thrift Supervision.

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