Investor Michael Price is bringing his heavy-hitting brand of shareholder activism to a California community bank.
Mr. Price, whose demands for improved performance have forced some of the biggest banks in the country to the altar, is pushing for the sale of SC Bancorp, ratcheting up institutional pressure on the $476 million-asset Anaheim bank to find a buyer.
"We own things for a reason," said Raymond Garea, senior vice president of Franklin Mutual Advisers Inc., San Mateo, Calif. The company, which bought the assets of Mr. Price's Heine Securities in November, owns 5.4% of SC.
Whether they own large or small banks, "shareholders have a right to expect that management is a good steward for the assets that they're responsible for," Mr. Garea said.
The pressure on SC shows that no bank is too small to escape the sights of Wall Street titans in an era of high performance. Though Mr. Price has investments in other small banks, SC is the smallest he has gone after publicly.
SC officials, including president Larry Hartwig, did not return calls for comment, but Mr. Garea says Mr. Price's action could lead to a sale.
"I think that was the final weight on the scale," he said.
Steven J. Didion, bank analyst at Hoefer & Arnett in San Francisco, said Mr. Price's actions reflect the higher degree of attention that midsize community banks have attracted from large investors during the past few years.
"With that visibility comes risk of militant shareholders," he said. "Michael Price has gotten a lot of notoriety for taking action with other institutions and is capable of causing a lot of trouble."
Mr. Price, who in the last two years prodded the sales of Chase Manhattan Corp. and Michigan National Corp., is backing earlier calls by New Jersey's Basswood Partners for SC to put itself up for sale.
Paramus-based Basswood, which controls 9.77% of SC stock, is also raising the stakes in its own year-old fight with the bank. The firm's general partner and investment manager, Matthew Lindenbaum, has drafted a consent solicitation to shareholders, seeking support to expand the bank's board and add three independent directors. The draft was included in a Jan. 21 filing with the Securities and Exchange Commission, seeking regulatory approval.
SC also faces potential opposition from Boston Provident Partners, which holds nearly 5% of SC stock and is known to support activist shareholders.
All told, at least three East Coast institutional investors own 20% of SC, and all three are known to want a sale.
Mr. Garea stressed that Mr. Price did not intend to "send any broad signal," and noted that Franklin "didn't start this."
"Somebody else was not very pleased with this company and the way it was being run," Mr. Garea said. "We thought we'd make it publicly clear to them and the company that we support them."
In a filing with the SEC, Franklin criticized SC's "mediocre financial performance." Last week, SC reported yearend net income of $4.46 million, up from only $869,000 for 1995. Though an improvement from a year earlier, the yearend return on equity for 1996 was only 9.3%.
Franklin said it strongly disagreed with the bank's oft-stated strategy of boosting profits by acquiring other companies.
The fund noted that the active consolidation in Southern California has already driven up merger prices beyond reasonable levels, and pointed out that those past deals were paid for with stock that was also trading at "unrealistically high values."
By contrast, SC's stock was trading at a discount until Basswood filed its first SEC documents in October. And fund officials indicated in the filing that they don't trust SC officials to handle any acquisition.
In the Basswood filing, Mr. Lindenbaum wrote it is "likely" that the bank could be sold to a larger company for a "substantial premium." But bank management "is not seriously considering this option."
"I have become increasingly disturbed at the very slow progress our company has been making toward achieving even mediocre profitability," he wrote.
Basswood is nominating three shareholders as directors: its other general partner, Bennett Lindenbaum; Oxnard, Calif., attorney Paul W. Kurzeka; and William M. Tomlinson 2d, chief financial officer of developer Tomlinson Enterprises.