Two years of hand-wringing - and hand-holding - is finally over for Huntington Bancshares Inc. of Columbus, Ohio.
The $33 billion-asset company closed its tortured deal for Unizan Financial Corp. on Wednesday. It was announced Jan. 27, 2004, and set to close that July, but securities and banking regulators delayed it over questions about Huntington's policies on loan-loss reserving and its accounting for auto loans.
"I was an investment banker for 11 years, and I've never seen anything take as long as this," said Kevin Reevey, an analyst with BankAtlantic Bancorp Inc.'s Ryan Beck & Co. Inc.
Over the past two years, Huntington has had to reassure its own and Unizan's shareholders, customers, and employees while defending its reputation as a dedicated acquirer. And it did that under the watchful eye of the Federal Reserve, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission.
Huntington squared things away with banking regulators last March, agreeing to fix internal controls, and struck a deal with the SEC last June. Without admitting or denying anything, executives including chairman, president, and chief executive Thomas E. Hoaglin agreed to pay $1.1 million in fines and not to violate various accounting rules.
The Fed finally gave Huntington the green light to buy on Jan. 26, one day shy of the deal's two-year anniversary.
If the deal had collapsed, analysts said, Huntington would have lost credibility with future acquisition targets.
"The Midwest is a consolidating region," said Steven Alexopoulos, an analyst with Sandler O'Neill & Partners LP. "You want small banks to look to you when they're ready to pull the trigger and sell."
And Unizan, of Canton, Ohio, risked the perception it was not worth buying.
"Unizan needed this a lot more than Huntington needed it," said Jeff K. Davis, an analyst with First Horizon National Corp.'s FTN Midwest Research Securities Corp. "Unizan was in a mode to be acquired; that's not a point from which you grow."
Unizan's assets slipped to $2.5 billion, from $2.7 billion when the deal was announced. Mr. Davis said the smaller Unizan still benefits Huntington.
"Huntington isn't a market leader outside of Columbus … so they tend to be a price follower," Mr. Davis said. "This gives them pricing power" in other Ohio markets.
Mr. Hoaglin left Bank One to lead Huntington in 2001. He was unavailable for comment yesterday, but in a statement he said, "We appreciate greatly the patience and support of the Unizan customers, associates, and shareholders through what turned out to be a lengthy process.
"This merger expands Huntington's presence in three important markets in Ohio centered in the Canton, Zanesville, and Newark areas and bolsters our presence in the Dayton and Columbus areas," he added.
Mr. Hoaglin announced that Roger Mann, Unizan's president and CEO, would be the president of a newly formed eastern Ohio region.
The stock-swap aspect of the deal - 1.1424 Huntington shares for one Unizan share - was not changed when it was extended in November 2004. Fluctuations in the companies' stock prices moved the total price from $587 million to $610 million by the time the deal closed.
Huntington agreed to pay a special dividend of 42.53 cents per share - or $9.4 million in all - on Thursday to holders of Unizan stock as of Feb. 23.
Mr. Alexopoulos said the terms of the deal would have been difficult to renegotiate for both sides, because Unizan was losing assets and Huntington was grappling with regulatory problems. Sandler O'Neill advised Unizan in the deal and made a market in Unizan stock.
On Feb. 13, Huntington notified 140 Unizan employees, about a quarter of the work force, that they would be laid off. Next month Unizan's signs will change and its systems will be converted, Mr. Hoaglin said.
