Mid Am Inc.'s expansion into the Cleveland area will have to wait now that the Ohio company's agreement to acquire Security First Corp. has fallen apart.
Bowling Green-based Mid Am and Security First Corp. of Mayfield Heights announced late Wednesday that they have terminated their September merger agreement.
Mid Am Inc. At a GlanceHeadquarters Bowling Green, OhioCEO Edward J. ReiterPresident David R. FranciscoAssets $1.9 billionOffices 84ROA 1.4%ROE 15.25%
The announcement followed a week of back-and-forth in which the deal seemed to have died with threats of a lawsuit, only to be briefly resurrected before being finally killed.
Mid Am chairman and chief executive Edward Reiter and his Security First counterpart, Charles Valentine, said Security First has agreed to pay $275,000 by yearend to reimburse Mid Am's expenses in preparing the deal. Further, if it is acquired for $14.79 or more per share before June 30, 1996, Security First would pay an additional $2 million to Mid Am.
"We just recently came to the conclusion that this thing doesn't make sense," said W. Granger Souder, Mid Am's senior vice president and general counsel.
Confusion about the deal began last Thursday, when Mid Am announced that Security First wanted to halt a definitive agreement to be acquired by Mid Am.
The $1.9 billion-asset company said it was "considering its alternatives in response to this development, including possible legal action against Security First."
Then on Friday, the parent of $410 million-asset Security Federal Savings and Loan Association of Cleveland issued its own statement saying it was "prepared to continue to honor its contractual commitments under the September merger agreement."
Subsequently, talks between the companies ensued, but the final result was termination of the merger.
Austin J. Mulhern, First Security's president and chief operating officer, said both companies began discussing terminating the merger a couple of weeks ago. But one thing led to another through various attorneys and, "It turned ugly in a short period of time," he said.
The deal, announced on Sept. 1, originally was valued at about $78.9 million, or $17.98 per Security share, through the exchange of 1.16 Mid Am common shares for each Security common share outstanding. But after a 10% Mid Am stock dividend, the exchange ratio was adjusted to 1.276 Mid Am shares for each Security share, making the deal's value $18.18 for each Security share, Mr. Souder said.
However, it's still unclear exactly why the deal fell apart.
"There's no ax murderers at either company, just the determination that it didn't work out," Mr. Mulhern said.
"It's not like somebody's in derivatives or somebody hedged huge loan losses in their portfolio."
Mr. Souder agreed that nothing specific came up in due diligence. "It's just deteriorated and this is the logical result," he said, adding that it had nothing to do with asset quality at either institution.
Daniel G. Bandi, an analyst at The Ohio Co. in Columbus, also was unsure why the deal died. "I don't really have any insight into why it happened," he said.
Both companies "would've been successful with or without each other," he said.
Now, Mid Am, typically an aggressive acquirer, will continue to look at other possibilities, Mr. Souder said. The company has another deal pending in Michigan.
And without the Security First franchise, "We still view Cleveland as an attractive market," he said.
And although Security First must reimburse Mid Am as well as pay its own merger-related expenses, the company should be fine if it keeps up its development and construction financing niche and maintains returns, Mr. Bandi said.
As far as the company's future, "I can't say where we're going to go exactly from here," said Mr. Mulhern. He said Security First wasn't actively looking for a merger partner when it struck up the deal and hasn't been talking to other possible acquirers.