The collapse of a $270 million merger in New Jersey between Summit Bancorp. and Bankers Corp. is being blamed on the premature disclosure of their letter-of-intent.
Joseph P. Gemmell, chief executive officer of Bankers, the holding company for Bankers Savings based in Perth Amboy, said news of the discussions was leaked to traders, resulting in a surge in Bankers' stock price. That forced the two parties to act before they were ready to go public, he said.
Without the inadvertent exposure -- and an October deadline imposed in the letter it might have been possible to hammer out a merger behind closed doors, Mr. Gemmell told American Banker.
After moving up slowly for most of September, shares of $1.7 billion-asset Bankers Corp. jumped more than $1 to $16.875 on Sept. 23. On the next trading day, the two banks announced the letter-of-intent.
Late Friday the banks terminated the negotiations amicably, Mr. Gemmell said.
Some Wall Street sources speculate that the announced price of 1.60 times book value did not meet with Mr. Gemmell's satisfaction.
He owns roughly 6.3% of Bankers' stock, and insiders own 28.16% of the thrift's stock, according to the March proxy statement.
"The deal was very cheap, and I wouldn't be surprised if Bankers got calls" from other banks with better offers, said an investment banker who requested anonymity.
Recent thrift deals in New Jersey have varied in price, ranging from the 1.94 times book value UJB Financial Corp. paid for Palisades Savings Bank to the 1.33 times book value Summit paid for Crestmont Financial Corp.
The failure of the discussions with Bankers was seen as a major blow to Chatham-based Summit, which would have become a major force in Middlesex County, a desirable location for banks seeking a presence in the state.
Summit itself would have been a much more attractive candidate for other acquirers, analysts said.
Another theory holds that Summit would have been paying too much for Bankers, despite its advantageous geography.
Bankers has an extraordinarily low efficiency ratio -- below 40% -- so absorbing it into Summit would have led to few efficiencies, one investment banker said. In fact, he said, it was probably Summit shareholders unhappy with the price who scuttled the deal.
Keefe, Bruyette & Woods Inc., Summit's financial adviser, would not comment on the deal, citing client confidentiality.
Neither of the banks would comment beyond Mr. Gemmell's statements.
And Mr. Gemmell responded, with a "no comment" to queries about his satisfaction with the price in the letter of intent.
But he has made no secret about wanting to sell the bank, and sources say he is shopping it around for the best price.
An investment banker close to Bankers Corp. says his firm hopes to make a presentation to Mr. Gemmell next week.
Banks expected to be interested in Bankers include Sovereign Bancorp. and Meridian Bancorp. Inc., both of which have made recent acquisitions in surrounding New Jersey counties, but have a weak presence in Middlesex, said Elizabeth Summers, an analyst with Ryan Beck & Co., which represented Bankers in the failed deal.
Part of the problem for Bankers, she added, is that its investment in technology may not be compatible with other banks.
In fact, the issue of technology was not in the announcement of the letter of intent, she said, indicating that it may .have been a sticking point.
Had Summit, which announced earlier this year that it hoped to double its size in the next few years, successfully merged with Bankers, it would have catapulted the bank to second from 12th in Middlesex County deposit share.
The letter of intent included a walkaway price, or collar, of $18.25 for Summit stock on the downside. Summit was trading at $21.375 Wednesday afternoon.