North Fork Bancorp may not be alone for long in its pursuit of Dime Bancorp.
With Dime's deal to merge with Mahwah, N.J.-based Hudson United Bancorp all but dead, Dime shareholders are busy speculating about other suitors, and the short list of candidates emerging is not all that surprising: Citigroup, HSBC USA Inc., and ABN Amro.
Now that bank and thrift stocks are on the rise, Dime could attract a bid of up to 20% above the unsolicited $1.9 billion North Fork made in early March, market watchers said. A price in the range of $2 billion to $2.5 billion would not be a stretch for huge banks like Citi, HSBC, and ABN Amro, all three of which have expressed a desire to expand their existing U.S. retail operations.
Dime shareholders, of course, have motives of their own. Sorely disappointed by a merger announced last fall between Dime and Hudson United that offered them no premium, many of the former's largest shareholders defected last month and vowed not to approve the transaction, instead throwing their support behind North Fork.
Dime management in turn has worked feverishly to push through the Hudson United deal, going to great lengths in the courts to fend off North Fork. Even though North Fork has since indicated a willingness to raise its bid, Dime has made clear in statements that it does not see such a combination to be in the best interests of shareholders.
The slim chance of a détente emerging between Dime and North Fork has fueled speculation. "There are much higher bids to be had," said Jeffrey Gendell, a partner at New York-based Totine Partners, which owns more than 1.7 million shares of Dime. "I would be surprised if there weren't bidders that paid materially higher prices."
"There is a possibility that they remain independent," said Thomas Theurkauf, an analyst at Keefe Bruyette & Woods. "There is also the possibility that with [bank stocks] moving, they could cut a better deal."
Spokeswomen for Citi, HSBC and ABN Amro all declined to comment.
Citigroup has been high on the list of potential white-knight bidders for Dime. Recent statements by Citi executives indicate a desire to build up the company's U.S. retail banking, particularly in mortgage services, and many analysts said acquisitions would play a role in that strategy.
A purchase of Dime would give Citi a branch presence in Brooklyn and Long Island, where it has few offices. Citi would also get North American Mortgage Co., which ranks among the 10 largest originators of mortgage loans.
Citi's branch banking and consumer finance operations "are likely to have acquisitions as part of their strategic destiny," said George Bicher, an analyst at Deutsche Banc Alex. Brown, in a recent note to investors that followed a presentation to analysts by Citi's newest head of those businesses, Marge Magner.
Dime may have cleared a hurdle for Citi to make a bid when it won a court order late last month blocking Salomon Smith Barney from acting as adviser to North Fork on its hostile bid. Salomon, a unit of Citi, is subject to a three-year-old confidentiality agreement it signed when it helped Dime acquire North American Mortgage in 1997. A Dime spokesman said the lawyer who prevailed in that case was not available to comment on whether Citi continued to have a conflict in bidding for Dime.
Lawrence J. Toal, chief executive officer of Dime, and John Adam Kanas, chief executive officer of North Fork have engaged in a war of words over the battle to win over Dime shareholders, though the two have been prevented from talking about a deal directly because of a "no-talk" agreement between Dime and Hudson United.North Fork continues to be advised by Sandler O'Neill Partners in its transaction.
"Citi has to make up its own mind," Mr. Kanas said, when asked if he saw Citi as a likely acquirer of Dime.
Analysts said HSBC, which is in the process of integrating its $10 billion purchase last year of Republic New York Corp., is also a strong contender.
HSBC, a unit of London-based HSBC Holdings, has made no secret of its desire to establish a firmer presence in the U.S. market. An acquisition of Dime would bring some cost savings from overlapping operations in Brooklyn and Long Island, analysts said.
Dutch-owned ABN Amro could also make a bid in an effort to build its existing New York area operation, which functions under the name European American Bank and is concentrated on Long Island.
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