The newly formed Pacific Community Banking Group is turning to the public markets to fund the purchases of two Riverside County (Calif.) banks.
If investors embrace the $80 million public offering, the Laguna Hills, Calif.-based holding company would become the largest independent banking company in Riverside County, with $370 million of assets and 12 branches.
Headed by the former vice chairman of Western Bancorp, Pacific Community intends to buy Bank of Hemet (Calif.) and Valley Bank in Moreno for $67.7 million in cash. They would be combined under a name still to be determined, and their executives would be given seats on a new board.
E. Lynn Caswell, chairman and chief executive of Pacific Community, said the strategy is to buy eight to 10 well-managed banks in Southern California by 2008 and to amass more than $1 billion of assets.
In most situations the holding company would let the acquired banks keep their names and local management while slashing administrative costs by up to 30%.
Mr. Caswell, a Federal Reserve Bank of San Francisco director and past California State chairman of the American Bankers Association, intends to use his contacts to make deals. "I know nearly every bank president in the state and who is interested in selling," said Mr. Caswell, who is talking to four other banks. "I think I can get my foot into the door and tell them my story."
Ed Furash, chairman of Furash & Co. in Washington, D.C., said Pacific Community's plan is bold considering the weakened bank IPO market. But he praised the quasi roll-up strategy nonetheless, adding that California is an ideal market to carry out the venture. "It's highly unusual for a third party to make acquisitions of this nature," Mr. Furash said. "It's different but not impossible."
Pacific Community would buy Bank of Hemut for $58.50 a share and Valley Bank for $12.50 per share. BankLink, a data processing subsidiary owned by Bank of Hemut, is included in the deal.
After Labor Day, Pacific Community is expected to file IPO documents with the Securities and Exchange Commission. Those papers probably will disclose the sale of roughly three million to five million shares priced around $15 to $20. Sutro & Co. in Los Angeles will underwrite the offering.
