What Gold Banc Corp. would give for one reassuring phone call.
The Leawood, Kan., banking company, in turmoil for two years, finally found its salvation in a $672 million offer from a group of investors led by C. Stanley Bailey, the former chief executive of Superior Financial Corp. of Fort Smith, Ark.
But the scheduled closing date came and went last month, and this week's announcement that Gold would pay $16 million to settle a lawsuit knocks its capital below the $277 million threshold required by the deal.
The investor group has indicated it wants to renegotiate the sale price, but Gold's chief executive, Mick Aslin, said he has not heard from Mr. Bailey yet. Gold spokesman Sherman Titens confirmed Tuesday that no one at Gold had yet talked with anyone representing the investor group, Silver Acquisition Corp.
In an interview Monday, Mr. Aslin said he was confident the investor group "still wants to do the deal. I see no reason why it shouldn't go forward."
But Curtis D. Carpenter, managing director of investment banking services at Alex Sheshunoff & Co. in Austin, found it troublesome that no one from the investor group had been in contact with Gold.
"You'd like to see a relationship where the two sides were in close communication and where they would issue a joint statement in a case like this," Mr. Carpenter said.
That would probably be the case if Gold were being bought by another bank rather than an investor group, he said.
"A bank that makes a business out of mergers and acquisitions has to treat its partners sensitively in order to protect its reputation," Mr. Carpenter said. "An investor group is different. They're only interested in doing one or two deals, so they can play hardball."
Mr. Bailey did not return several calls from American Banker seeking comment.
In a release Monday, the company quoted Mr. Aslin as saying, "We have not yet discussed the effect of this settlement with Silver although we have been informed that Silver will seek some adjustment of the purchase price of $16.60 and/or the purchase price escalator of $0.0023 per share for each day after July 23, 2004, by which the closing is delayed."
"We recognize that one aspect of these discussions will be the possibility that the condition that we have at least $277 million in total equity at closing may not be satisfied," he said.
Gold officials contend the company has been earning nearly $2.8 million a month, and could rebuild its equity by the time the deal closes, allowing the original deal price to stand.
The deal, announced Feb. 25, needs shareholder approval and a green light from the Office of Thrift Supervision, which pushed back its deadline to Nov. 17 for ruling on Gold's application to sell.
Mr. Aslin said settling the lawsuit would cost his $4.2 billion-asset company about $10.2 million of its capital ($2 million of the $16 million payout is covered by insurance, another $3.8 million by a tax credit). The settlement reduced Gold's second-quarter profit to $309,000 and its six-month profit to $13.6 million.
Analysts applauded the settlement of the lawsuit, which accused Gold of overcharging agricultural borrowers.
"If anything, it may allow the transaction to get completed a little more quickly," said Daniel E. Cardenas of Howe Barnes Investments Inc. in Chicago. "That thing could have dragged out a few more months."
Eric Rothmann, who works with Mr. Cardenas at Howe Barnes, said he expected the investor group to finish the deal.
"I don't believe them to be the type of investors that would just stand by idly," he said. "They're still going forward; if the deal wasn't, they would have come out and said they are pulling the plug."
A sale would end a difficult stretch for Gold.
Since March 2003 the company has endured the forced resignation of its founder and longtime CEO, Michael W. Gullion, for diverting millions of dollars in corporate funds into his personal bank account; a written agreement with state and federal regulators who criticized its internal controls and audit policies; and legal problems.
The qui tam lawsuit that was settled Monday had been filed almost two years ago by Roger L. Ediger (qui tam is a term for suits initiated by private citizens on behalf of the federal government). Mr. Ediger claimed Gold violated the law by charging higher-than-average fees on government-guaranteed agricultural loans. Gold inherited the loan when it acquired People First Bank of Hennessey, Okla., in March 2000. The suit was sealed for almost two years, and Gold did not learn of it until June 14.
A shareholder suit filed in March claimed that Gold improperly sold 530,000 shares of stock to members of the board in the weeks leading up to the announcement of the deal with Silver Acquisition. It was dismissed in July.
