Pacific's Tentative Deal To Be Acquired Sends Its Stock Surging 40%

Pacific Bank's stock soared 40% after it signed a letter of intent to be bought by a suitor from the north for at least $20 a share.

The San Francisco bank's cash deal with Western Bank, Coos Bay, Ore., will be worth at least $55 million, or six times the bank's market value when it hit bottom in 1992. The purchase price will be based on a multiple of the bank's $16.36 book value. At the minimum $20 price, it would be 1.2 times book.

The Oregon community bank's interest in the San Francisco private bank isn't so unusual as first glance would suggest. Georges C. St. Laurent Jr., chairman and chief executive of Western Bank, bought a 10% stake in Pacific Bank in 1993 when Pacific went through a recapitalization.

One analyst speculated that Western's bid could spark other offers for Pacific, which has a potentially valuable trade finance business.

"The price doesn't exactly make your eyes pop out," said the analyst. "Someone could easily beat it."

The letter of intent with Western, announced Jan. 19, has provided a rare bit of good news for the private banking houses that sprang up in San Francisco and Los Angeles in the 1980s. Most are still languishing, unable to shake the real estate problems that began in 1991.

Western's Mr. St. Laurent, in a statement, said the purchase will likely be a stepping-stone for further acquisitions in the Golden State.

"Recently, we have opened branches and loan offices in the Portland area, Salem, and Eugene," he said. "This would provide Western shareholders and customers with a financial presence in the San Francisco area and the opportunity in the future to further diversify its banking operations through expansion in northern California."

Mike Sickels, chief financial officer of Western, said the bank's long- term plans have always included northern California, as far south as San Francisco. He said it was this that attracted the bank to Pacific, not only its trade finance business.

Western Bank has done well in recent years, and booked solid growth in assets and income in 1994, reaching $718 million in assets and 40 branches.

Western Bank plans to form a holding company, which then would buy the outstanding shares of Pacific. The companies stated that the banks would operate as stand-alone subsidiaries, each with its own management and name.

Norman "Ned" Dean, Pacific's chairman, was hired in 1993 and led a dramatic restructuring that saved the company. It culminated in the sale of $30 million in stock with the help of Keefe, Bruyette & Woods. Its level of nonperforming assets has fallen from more than 16% of total assets in 1993 - the highest of any bank in California - to less than 7% as of last June.

Pacific management could not be reached for comment. In a statement, however, Mr. Dean said the deal is good for shareholders.

"The proposed acquisition will provide ... a price significantly higher than the current market," he said. "The proposed merger is a reflection of the dramatic turnaround of the Pacific Bank. In addition, it will allow us to develop our niche markets, including trade finance."

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