NorCrown Bank in New Jersey was undoubtedly affected by its owner's legal woes, but its buyer insists it is getting a solid company with 15 branches in some of the country's most desirable markets.
Valley National Bancorp of Wayne, N.J., announced late Tuesday that it had agreed to pay $141 million for the $622 million-asset NorCrown, of Livingston. The announcement came three months after Charles Kushner, NorCrown's owner and a prominent New Jersey developer and political activist, was convicted of tax fraud and illegal campaign contribution charges.
Federal law bars felons from owning or investing in banks.
Gerald H. Lipkin, Valley National's chairman, president, and chief executive officer, said that even though he is always on the lookout for deals in northern New Jersey, he had not considered NorCrown, because Mr. Kushner had never expressed any interest in selling.
The acquisition would be the $10.6 billion-asset Valley's largest in its home state since 1998.
"This is a wonderful opportunity for us," Mr. Lipkin said in an interview Wednesday. "The misdeeds of Mr. Kushner had nothing to do with this bank. It is very sound."
NorCrown was founded in 1985, but it had less than $25 million of assets when Mr. Kushner acquired 100% of its stock a decade later. It grew rapidly under his control, focusing primarily on financing apartment houses.
Alan Hammer, a friend of Mr. Kushner's who is serving as the chairman of his holding company, Kushner Cos., said NorCrown would not have sold itself "under any circumstances" had it not been for Mr. Kushner's conviction.
"This was a long-term project," he said. "It was not about selling for a profit. It was about building a successful regional bank, and we were well on the way to doing that. A lot of effort and heart went into this bank."
NorCrown's branches are in the affluent Hudson, Morris, Essex, and Union counties. Valley National had been eager to expand in all those counties but had found it difficult to do so, "because all the attractive locations already have a branch on them," Mr. Lipkin said.
Gerard Cassidy, an analyst with Royal Bank of Canada's RBC Capital Markets Group in Portland, Maine, said Mr. Kushner's problems "create an added layer of risk," but he also said NorCrown could not have picked a better buyer.
Anthony R. Davis, who covers Valley National for Ryan Beck & Co. Inc. in NorCrown's hometown of Livingston, said, "A year from now nobody's going to remember NorCrown and Kushner."
Mr. Kushner, 50, was a frequent and heavy political donor. He gave mostly to Democratic candidates, including former Governor James E. McGreevey of New Jersey, who appointed Mr. Kushner to head the Port Authority of New York and New Jersey in 2002. Following his arrest in July, Mr. Kushner pleaded guilty to defrauding the Internal Revenue Service and lying to the Federal Election Commission.
Before agreeing to buy NorCrown, Valley National conducted extensive due diligence, which gave it "the comfort necessary to enter into this transaction," Mr. Lipkin said. "There were some difficulties with Mr. Kushner and some contributions which should not have been made, but not by" NorCrown.
Valley National would pay half of the $141 million price in cash and half in stock. The transaction is expected to close in the first quarter. NorCrown would be merged into Valley National's bank subsidiary, Valley National Bank.
The price works out to three times NorCrown's book value and almost 20 times its earnings last year. "The price was not cheap, but community banks are fetching high prices, because it is a Neiman Marcus market. It is very difficult to do a Filene's Basement kind of deal," Mr. Cassidy said.
