After buying Centennial Bank Holdings Inc. in Fort Collins, Colo., a group of investors led by John M. Eggemeyer did not waste any time making a second deal to nearly triple Centennial's size.
The $809 million-asset Centennial said Wednesday that it plans to buy the $1.5 billion-asset Guaranty Corp. of Denver for $365 million in cash. The deal is expected to close in the fourth quarter or early next year; Centennial would then have about $2.4 billion of assets and 30 branches.
The deal was announced just weeks after an investment group led by Castle Creek Capital LLC of Rancho Santa Fe, Calif., acquired Centennial for $155 million.
Mr. Eggemeyer, Castle Creek's president and CEO and now Centennial's chairman and CEO, said in an interview Wednesday that it certainly planned to bulk up in Colorado, but he did not expect its first deal to come together so quickly.
"The opportunity to acquire Guaranty just presented itself in July, and we were quite surprised by it," he said. "Our goal had been to become a $2.5 billion-asset company in the next several years, but we're very excited to get to that threshold right away with a single acquisition."
He and his group hope to replicate the success they have had in California and Texas. Castle Creek has a 13% stake in the $2.7 billion-asset First Community Bancorp in Rancho Santa Fe, Calif., which has bought 10 banks since 2001. Castle Creek has a 29% stake in the $1.1 billion-asset State National Bancshares Inc. in Lubbock, Tex., which has bought seven banks since 1998.
"Colorado has one of the fastest-growing economies in the country, and a very fragmented banking market," Mr. Eggemeyer said. "When you have 131 independent banks in Colorado, you have a good base of potential acquisition candidates from which to build."
Campbell Chaney, an analyst at Sander Morris Harris in San Francisco, said Mr. Eggemeyer is an "empire builder" who started in California by creating Western Bancorp of Los Angeles in 1994. In five years its assets grew from $60 million to $2.6 billion, and in 1999 U.S. Bancorp of Minneapolis bought it for $958 million, or 4.4 times book value.
"He's a master negotiator, buying these banks at fairly reasonable prices, consolidating them until they get to a critical mass, and then selling them to someone else," Mr. Chaney said.
Centennial is paying a fairly high price for Guaranty, though - 3.38 times book. Mr. Eggemeyer said the price reflects the fact that Guaranty is larger than Centennial and has been growing very rapidly over the past several years.
Though he has been known to sell banking companies he has helped build in the past, he said that he is not so willing to let go of a bank so easily these days.
It now takes much longer to build a company, and "it's so hard to re-create truly quality banking franchises." At Western Bancorp, "we got to $2.7 billion in assets through six acquisitions; it's taken 12 acquisitions to get to that size with First Community," said Mr. Eggemeyer, who is also that company's chairman. "Our goal is to operate our banks as though we're going to run them forever, because that may well be the case."
Andrew Rosenburgh, a managing director for the Los Angeles office of Credit Suisse First Boston Corp., said Mr. Eggemeyer and his group really should be known mainly as skillful operators of banks, rather than buyers and sellers.
"They're ever mindful of shareholder value, and sometimes that means they sell banks, but I think it's unfair to paint them" as just sellers, Mr. Rosenburgh said. "They really build banks right for the long term, and they should be able to do this in Colorado, as well."
