A hostile, yearlong takeover effort by Oregon's Western Bank ended in defeat last week.

The $600 million-asset Coos Bay bank had sought to buy the $132 million-asset Bank of Newport, which is headquartered halfway up Oregon's Pacific coast.

But an Aug. 11 vote by shareholders representing 91% of Newport's equity buried a motion to oust the board.

Although hostile bids by, and for, community banks are rare, the postmortem sounds familiar. The winner downplays the victory, and the vanquished suitor blames dirty tricks.

Classroom for Small Banks

This particular fight was enthralling for small banks, says Newport chairman Jeff Ouderkirk.

"The shareholders meeting was very well attended by community bankers from Oregon and Washington," he said.

"The small banks wanted to see how to shield themselves from similar overtures. They learned that the key is excellent shareholder value and communication."

The motion to remove the Newport board was put before the shareholders by Western's chairman, Georges C. St. Laurent Jr., who holds about 5% of Newport equity.

It was defeated by a 2-to-1 margin, but Mr. St. Laurent says shareholder value for Newport investors is anything but excellent.

"They have a lot of very angry shareholders who wanted the directors to accept our offer," says Mr. St. Laurent.

"They tried to greenmail me, which didn't work; but they got a couple of independent banks to buy out their largest shareholder, which turned the tide against us."

Newport shares are trading at $15 bid, $17 ask. Last fall, and again this spring, Western offered $18 a share or a stock swap valued at $22 a share. Book value is $12.59.

In response to the first offer., Newport said the bid was short. In April, when the offer was repeated -- and put before the media -- Mr. Ouderkirk said Mr. St. Laurent was interested in Newport solely to sweeten Western's takeover value.

'Might Be in Play'

Newport, says Mr. Ouderkirk, was founded by a Bank of America executive who gave up on money-center banking. He says Mr. St. Laurent would gladly hand over the keys to Western and Newport the moment a big bank tendered an offer.

"He has been growing the bank very rapidly, and he's unwilling to reveal any long-term strategy, if he has one. Western's stock has been trading at an overheated price, and that suggests to me that Western might be in play."

Mr. Ouderkirk says Mr. St. Laurent was asked to consider an offer for his stake in Newport, but dismisses any suggestion that the offer was sweetened to drive him away. "Our offer was around market value. We know what the banking laws are, and we categorically deny that we were greenmailing anyone."

'We Didn't Buy Any Shares'

As to the buyout of Newport's largest shareholder, Mr. Ouderkirks says, "To our knowledge, no sale has been completed at this time. There may have been shares that traded hands, but the trade was at arm's length from the corporation. We didn't buy any shares."

He adds, "Even if the position held by our largest shareholder was turned over to Mr. St. Laurent, given the margin, it wouldn't have mattered."

Mr. St. Laurent would not say if he will bid for Newport again.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.