Once rebuffed in a bid to buy a hometown rival, South Umpqua State Bank said this week that it has a deal to acquire Douglas National Bank for roughly $43.2 million.
South Umpqua, based in Roseburg, Ore., would pay $22 per share-or about 3.66 times book value-for Douglas National and its parent, United Bancorp. The deal would create Oregon's third-largest community bank, with more than $400 million of assets.
"The game plan here is to put together a much stronger bank and gain some economies of scale," said Raymond P. Davis, president and chief executive officer of $266 million-asset South Umpqua.
South Umpqua and Douglas National have been competing in Roseburg since 1959. Together, the two stand a better chance of succeeding in a market dominated by large regional banks, said Tom Savinar, a bank analyst at Black & Co. in Portland, Ore.
In April, South Umpqua made an unsolicited $40 million offer for Douglas National. Fearing the merger would eliminate branches and jobs, Douglas National officials agreed instead to be bought by Cowlitz Bancorp of Longview, Wash., for about $37 million.
Under terms of this deal, which was announced June 1, Douglas National would have retained its name, board of directors, and management. However, Cowlitz withdrew its bid days later after South Umpqua raised its offer by more than $3 million.
Douglas National began negotiating with South Umpqua last week. In a press release, Douglas National president Neil Zick said he was pleased to make an agreement that "addresses shareholder concerns."
Mr. Davis said some Douglas National branches would be closed and about 40 jobs would be lost if the merger goes through. The deal is expected to close in the third or fourth quarter.