Community First Bankshares, one of the most acquisitive banks in the Midwest, has adopted a shareholder rights plan to guard against unwelcome suitors.
The $1.4 billion-asset company in Fargo, N.D., said this week that it is not aware of any overtures to acquire it, but, "We felt that our stock was undervalued relative to the market," explained Donald R. Mengedoth, president and chief executive officer.
Further, the impending interstate laws could put the company in the eye of a broader array of possible acquirers, he said.
Bank analyst Gregory P. Anderson of the Chicago Corp. also was unaware of any takeover rumors regarding Community First. "This isn't a shark repellent," Mr. Anderson said. "This is more of a hedge so they can create shareholder value on their own."
Mr. Mengedoth, who with chief financial officer Mark A. Anderson owns about 7% of the company's stock, said he initially questioned the need for such a plan. "I kept saying, 'In the banking industry, hostile takeovers don't happen,'" very often, he said.
But he now thinks it's a good idea to protect shareholder interests and predicts more such plans this year.
"Banks frequently turn to this question when their stock is viewed as being depressed," Mr. Mengedoth said. "I suspect there will be more coming out."
Mr. Mengedoth said the plan would allow Community First ample time to consider any unsolicited offers. "It doesn't mean we would never consider an offer," he said.
Community First operates in 39 mostly small-town communities in five Midwestern states and has four acquisitions pending, totaling about $700 million in assets.
The shareholder rights plan calls for the distribution of one right for each share of common stock outstanding on Jan. 19, 1995. Each right allows the purchase of 1/100th of a share of a new series of junior participating preferred stock.
Rights are exercisable only after 15% or more of the company's voting stock is acquired without prior board consent or after a tender exchange offer to acquire an interest of 15% or more is announced.
