Frank For-Sale Declaration Raises Eyebrows

In a move akin to hanging a "for sale" sign in the window, a small Florida banking company's new chairman has let shareholders know he's seeking a buyer.

Raymond K. Mason Jr., president, chairman, and chief executive officer of American Banks of Florida, Jacksonville, wrote a letter to shareholders last month saying the company wants to sell but hasn't entered into any deal yet. Mr. Mason succeeded his father in March as the holding company's chairman.

The move has left some analysts wondering what's to gain from spilling the beans before a merger deal is in the works. One analyst familiar with the company's situation said Mr. Mason took the step so the bank's stock would go up before a sale.

But whatever the reason, the bank's action has forced officials at American Banks, parent of American National Bank of Florida, to go on the defensive.

Mr. Mason "wanted to be the first to tell our employees and shareholders-he didn't want anyone to find out about it on the street," said Richard Martin, vice chairman of American National. "And sometimes you can even get a better price than if you try to keep it quiet."

Mr. Martin said Mr. Mason's own son was too young to continue the family's involvement with the bank, so he and his father decided to sell. Raymond Mason Sr. has been the bank's largest shareholder since he bought a controlling interest when it first became American National Bank of Florida in 1967.

But several bank analysts said the reason for the usual secrecy surrounding a bank's intentions to sell is the damage such information can do to both customer relations and employee morale.

"If a customer knows you're going to sell a bank, is that customer really going to want to take his next $2 million dollar loan from you?" said Jeffrey Cohn, bank equity analyst with M. Kraus & Co. "And if I was in an organization where my boss said, 'We're going to sell the company, don't know when, but ...,' I'd say, 'Thanks for telling me, I'll get the resumes out.'"

Mr. Martin said morale hasn't been harmed. "The employees would run into a brick wall" for Mr. Mason, he said. He added that the bank hadn't lost any deposits or loan prospects.

Most banks that decide to sell, said Chris Hargrove, president of Louisville, Ky.-based Professional Bank Services, choose to hint rather than declare that intention.

In this way, the bank avoids later lawsuits from shareholders who sell stock before a deal is announced and then claim they were out in the cold about management's intentions.

Edwin F. Hale Sr., chairman of Baltimore-based First Mariner Bancorp, knows firsthand the problems that are caused by a premature announcement.

Mr. Hale, former chairman of the now defunct Baltimore Bancorp, remembers when word was leaked that five banks had responded to a secret letter of solicitation by the bank. Subsequent feverish trading of the bank's stock in 1994 forced a public announcement.

Mr. Hale said that news was damaging in the short run to the company.

"Those deals we had pending, like commercial loans, people wanted to close," Mr. Hale said. "If we hadn't sold the bank, we would have been damaged goods."

Baltimore Bancorp was sold to First Fidelity Bancorp 10 months later, in November 1994.

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