Two New York-area thrifts were at a standoff Tuesday over whether to complete their $750 million merger deal.
T R Financial Corp. of Garden City told Roslyn Bancorp to increase its all-stock offer by 3.1% or lose the deal, which has already been approved by regulators and shareholders of both companies. T R's demand came one day after Roslyn chairman Joseph L. Mancino said that he would not pay more for T R.
The proposed deal would be the largest to fall apart because of the slide in bank and thrift stock prices during the summer, which has already forced several companies to sweeten their offers or cancel them. Roslyn's shares have slipped 24% since the companies announced their merger agreement in May.
As news of the impasse hit the market Tuesday, T R shares fell $2.125, to $36.50. Roslyn shares rose 50 cents, to $21, and analysts were sharply divided on whether the two companies would actually merge.
"The tone of this deal has turned negative," said Chad Yonker, an analyst at Fox-Pitt Kelton. "There are plenty of other companies that would love to buy T R, so T R might well decide that this is not the best deal that can be had."
But other analysts said that though it is reasonable for T R chairman John M. Tsimbinos to ask Roslyn to up its offer, T R shareholders approved the merger last week and are unlikely to get a better price from another company.
"T R's action looks like very tough posturing," said Tucker Anthony analyst James Ackor. "T R's stock is worth considerably less than it trades for now without this merger, and if Tsimbinos doesn't think there will be carnage for walking away, he's mistaken."
The deal for T R Financial, a $4.1 billion-asset thrift company based in an affluent area of Long Island, would be Roslyn's first as a publicly traded company and would more than double its asset size.
Investors saw considerable risk in this merger and aggressively shed Roslyn's shares after the announcement, driving its price below the levels needed to guarantee the deal. Unlike many other bank and thrift stocks that slumped this year, Roslyn shares have failed to recover the ground they had lost.
The merger terms state that T R may walk away or ask for a higher offer if Roslyn's shares traded below $20.72 on the "valuation date," which was Dec. 24. On that day Roslyn closed at $20.6875.
On Tuesday the T R board asked Roslyn to increase its original offer of 2.05 shares for every T R share to 2.1137 by Jan. 2, a 3.1% increase,
"Completion of the transaction now rests in the hands of the Roslyn Board of Directors," T R said in a tersely worded statement.
Roslyn replied that it would not raise its offer.
"The board of directors of Roslyn Bancorp stated its intention concerning the merger's exchange ratio in its press release of Dec. 28, 1998," said a spokesman for the company.
Mr. Ackor of Tucker Anthony said he was baffled that T R would cancel a deal over 3.1%. "To me that's a disservice to T R's shareholders," he said.
Calling off the deal, he said, means T R is gambling that another company will pay as much or more than Roslyn.
Roslyn agreed to pay what Mr. Ackor called a "mind-blowing" 3.8 times book and 28 times earnings for T R when the deal was signed in May.
Despite the fall in Roslyn's stock price since the announcement, T R shareholders still stand to collect about $42 per share if the merger is completed. Without the merger, Mr. Ackor estimates, T R is worth $30 per share.
Mr. Yonker said T R's bet for a better deal may pay off. Long Island remains one of the nation's most attractive and least consolidated markets. Numerous banks and thrifts have taken themselves public there in recent years, and such New York thrifts as Dime Bancorp, GreenPoint Financial Corp., and Independence Community Bank all "would love to buy T R," he said.
Even if Roslyn does not meet T R's demands by Saturday, that might not be the final word. T R has until Jan. 24 to make a final decision on whether to go all the way to the altar after this difficult corporate courtship.