Ore. Bank in Unsolicited $40M Bid for Rival, Which Hires Adviser But

South Umpqua State Bank, Roseburg, Ore., made an unsolicited bid last week to acquire hometown rival Douglas National Bank for about $40 million in stock.

South Umpqua has offered $75 per share-or 2.2 times book value-for Douglas and its parent company, United Bancorp.

Raymond P. Davis, president and chief executive officer of $258 million- asset South Umpqua, said a merger would let the company make larger loans and gain a stronger presence in southwestern Oregon. Combined with $118 million-asset Douglas, South Umpqua would rank as the state's third-largest community bank.

"For us to deliver, we need to be a little bit bigger," Mr. Davis said.

Neil Zick, Douglas' president, said an investment banker has been hired to examine South Umpqua's bid. But he said the company would not begin negotiating until all the consequences are explored.

"We will be looking at the social, legal, and economic effects that this would have on customers, employees, suppliers, as well as stockholders," Mr. Zick said.

Robert J. Rogowski, principal at Columbia Financial Advisors in Seattle, said the deal makes sense. Though southwest Oregon's economy has been hit hard by the slowing of the timber industry, South Umpqua has thrived by expanding into fast-growing Eugene, Ore. The company, which went public this month, will also open a loan production office in Portland this week.

The problem, Mr. Rogowski said, is that South Umpqua and Douglas are longtime rivals and that Douglas' management might be wary of branch closings and staff cuts. South Umpqua was founded in 1953; Douglas, in 1959.

"It could be very much like Wells and Crocker of the '90s," said Mr. Rogowski, referring to the 1986 deal in which the San Francisco banking companies Wells Fargo & Co. and Crocker National merged, closing dozens of branches and cutting more than 4,000 jobs.

His prediction: "If Douglas was going to do something, it would probably be with a white knight."

Mr. Davis said he went public with his bid after rumors of the deal surfaced. South Umpqua's offer expires May 5.

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