In an apparent concession to disgruntled shareholders, PBOC Holdings Inc. of Los Angeles has amended its pending $200 million deal with an Illinois acquirer to give PBOC an out if another company makes a higher bid.
PBOC, the $3.3 billion-asset parent of Peoples Bank of California, announced Dec. 8 that it had agreed to be bought by FBOP Corp., a $5.4 billion-asset multibank holding company in Oak Park, Ill., for $10 a share. But within 12 days three shareholder groups had sued PBOC, claiming it breached its fiduciary duties by accepting what they called too low a price. The suits, filed in Delaware Chancery Court and consolidated into a single complaint in January, seek to halt the merger.
The amended merger agreement, announced last Thursday, would let PBOC cancel the deal if it gets a bid materially more favorable to the PBOC stockholders from a financial point of view than the $10-per-share merger consideration. PBOC said it had not received any other offer and still expects the FBOP deal to close this quarter.
Neither PBOC nor FBOP officials responded to requests for comment.
Industry observers said the amendment is intended to appease the shareholders unhappy with the deal, which is valued at 1.03 times PBOCs book value. But one analyst, Campbell K. Chaney of Sutro & Co. in San Francisco, said that given PBOCs below-average performance in recent years, the FBOP deal is a good one for shareholders.
Had the deal had been struck in early November, when PBOCs stock was trading in the $6 range, shareholders would have gotten no more than $9 a share, according to Mr. Chaney. The stock was trading at $9.875 late Monday.
I thought $10 was a generous price, he said.
Last June, the Office of Thrift Supervision ordered the company to reduce its exposure to rising interest rates and strengthen its loan underwriting standards. PBOC lost $6 million in the third quarter after selling $197.4 million of low-yielding, fixed-rate securities.
FBOP, which is privately held, owns banks in Illinois, Texas, and California. Its plan is to merge Peoples Bank into $1.3 billion-asset California National Bank in Los Angeles, one of its two subsidiaries in the state. FBOP also owns $1.4 billion-asset San Diego National Bank.
The deal announcement came just after FBOP had bought a large stake in PBOC. In November, FBOP announced in separate filings with the Securities and Exchange Commission that it was buying 33% of PBOCs stock from two shareholders. And in early December, it said it was acquiring an additional 4% of PBOC, this time from Advisory Research Inc. in Chicago.
By acquiring such a big stake in PBOC, the Illinois company became its controlling shareholder, according to one of the three lawsuits. As such, FBOP had an unfair advantage over other shareholders in negotiating the deal, the lawsuit said.
The desire of defendant FBOP to acquire the company made it impossible to conduct a bona fide market check or auction of the company, the lawsuit stated. Nor did the defendant directors allow sufficient time to conduct an auction or engage in a bona fide process of sale designed to maximize value for the public shareholders, or even to permit an informed conclusion that the proposed merger represents the best transaction available.
None of the lead plaintiffs in the three lawsuits was available to comment.
Despite PBOCs recent troubles, Mr. Chaney said, its place in the Southern California market makes its business attractive. He said he doubts, however, that a better offer would come along.
I dont know why FBOP would agree to the [amendment] unless they felt confident that a superior agreement would not come along, he said.
From Our Archive
- Midday Update: PBOC of Calif. Adds an Escape Hatch to Sale Deal - April 9, 2001
- It's Official: FBOP of Ill. Acquiring Calif. Company - December 12, 2000