A favorable tax ruling has nudged forward the anticipated spinoff of Cole Taylor Bank from Cole Taylor Financial Group.

The Internal Revenue Service ruled Sept. 3 that the proposal to sell the banking subsidiary to an investment group led by holding company officials would qualify as a tax-free transaction.

Such a ruling had been a condition of the deal, said holding company general counsel Jim Kaplan.

"The split-off needed to be tax-free or else substantial taxes would have had to have been paid," Mr. Kaplan said. A ruling the other way "would have rendered the transaction not as advantageous to shareholders."

The holding company still needs approvals from the Federal Reserve Board and the Federal Deposit Insurance Corp., as well as a shareholder vote, to complete the transaction.

Mr. Kaplan said the holding company should receive word from the regulators in the fall, with shareholders meeting shortly thereafter.

The decision to split was made in June after months of feuding over the company's future between the founding Taylor and Cole families.

In the families' arrangement, Cole Taylor Bank is to be sold to an investment group led by chairman Jeffrey Taylor, president Bruce Taylor, and co-founder and director Sidney Taylor.

Meanwhile, the holding company would retain control over its auto finance subsidiary. The unit's name would be changed to Cole Taylor Finance Co. from Reliance Acceptance Corp.

Normally, the IRS allows tax-free spinoffs only after a company has been in business for five years, while Reliance has only been active for two, Mr. Kaplan said.

But the holding company argued, successfully, that taxes should be waived because its bank subsidiary had done similar financing since the 1980s and would be turning over its auto receivables to the continuing entity, Mr. Kaplan said.

*

PORTLAND, Maine - Peoples Heritage Financial Group has initiated a modified "Dutch auction" to repurchase about 9.9% of its stock in conjunction with its pending acquisition of Family Bancorp, Haverhill, Mass.

The offer to buy back 2.5 million shares allows shareholders to set a price - between $21 and $24 per share - at which they're willing to sell back their stock. After the set offering period, the $4.4 billion-asset company will determine the per-share price for all shareholders based on what it needs to offer to attain its goal. If the company buys back more stock than needed, shares will be prorated.

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.