Omnibanc Corp. has pulled the plug on plans to acquire Chicago's Indecorp Inc.--a deal that would have created the country's largest multistate African-American-owned bank holding company.
Yesterday was the deadline for the deal to be completed or extended. But two days before Wednesday's deadline, Omnibanc chairman William T. Johnson requested that the Federal Reserve Bank of Chicago no longer consider the application.
In a two-page letter to the Fed, he said he was frustrated with the negotiations. "We do not see any point in seeking an extension of our Sept. 14,
1994, Federal Reserve Board of Governors approval of this merger transaction for any period," he wrote, "when we do not have a belief that Indecorp will seriously renegotiate the terms of the agreement at this time."
Indecorp chairman Alvin Boutte could not be reached for comment after several attempts.
Omnibanc last year struck a deal to purchase Indecorp's Independence Bank and Drexel National Bank. It would have given the $25 million-asset River Rouge, Mich., company about $325 million in assets.
The demise of the deal comes as little surprise after a recent stalemate in negotiations. Omnibanc recently discovered substantial unrealized losses on securities at Independence and Drexel that would have to be recognized in a sale. Subsequently, Mr. Johnson lowered his offer to $26 million from the original $35 million.
Mr. Johnson said Indecorp has unrealized losses of about $16 million because of investments in derivatives and mortgage-backed bonds. But Mr. Boutte has said total unrealized losses for both banks were about $10 million.
In his letter, Mr. Johnson said the agency had advised Omnibanc not to proceed with the acquisition until further review. The Michigan Financial Institutions Bureau also withdrew its approval for the merger. While both banker recently expressed little hope for the deal, Indecorp's Mr. Boutte said last week he was still considering Omnibanc's offer and would have its investment banker examine new offers.
However, in his letter, Mr. Johnson said Omni had not received any direct communication from Indecorp. He believed Indecorp's interest for proceeding with the deal was "only intended for public appearances -- not reality."
Mr. Johnson has said he will look at other expansion opportunities in Chicago.