A community bank in Victoria, Tex., has rejected a Houston banks $100 million-plus buyout offer and is instead pursuing a plan to delist its stock and become a privately held company.
David M. Gaddis, president and chief executive officer of $750 million-asset FVNB Corp., the holding company for First Victoria National Bank, said last week that he expects to take the company private shortly after its annual meeting Aug. 6.
On July 9 FVNB issued a prospectus detailing its proposal, which offers investors with 2,000 or fewer shares $45 per share.
Buying out its small investors would leave FVNB about 100 shareholders. This would put it well below the 500-shareholder threshold that permits companies to delist their stock and cease reporting their results to the Securities and Exchange Commission.
On page 17 of the 140-page prospectus, FVNB revealed that $1.2 billion-asset Prosperity Bancshares had offered 2.36 shares of its stock for each of FVNBs 2.4 million outstanding shares. At the time that deal was worth about $50 a share, or $119 million, but since then Prosperitys stock has soared, raising the price to about $59 a share, or $141 million.
The prospectus says FVNBs board of directors received word of Prosperitys offer in a May 7 letter from the Houston banks president and chief executive, David Zalman. On May 15 the board voted unanimously to reject it.
In an interview Friday, Mr. Zalman said the offer remains on the table but added that he has not pressed the issue, because he did not want his offer to touch off a hostile battle. Still, he called FVNBs decision to reject Prosperitys offer a mistake from the shareholders standpoint, saying that its plan to go private would leave the companys larger investors those holding more than 2,000 shares with an extremely illiquid stock.
I would still like FVNB to come back and look at our offer, Mr. Zalman said. They fit very will into our footprint. Everybody has always known that weve wanted to have them join our team.
Mr. Gaddis questioned Prosperitys offer, calling the larger companys stock thinly traded and saying FVNBs board of directors is committed to preserving the 134-year-old banks independence.
We plan to continue with our existing strategy, which has been quite successful for us, Mr. Gaddis said. We intend to show people that there is still value in an independent community bank.
But Mr. Gaddis argument failed to sway several analysts familiar with the Texas banking scene. If I was an FVNB shareholder and I could take $59 a share, or a cash price 31% below that, I wouldnt have to think hard, said Craig R. McMahen, a managing director at New Yorks Keefe, Bruyette & Woods Inc., which covers Prosperity.
Mr. McMahen also disputed Mr. Gaddis characterization of Prosperitys trading volume.
If you look at the monthly results, Prosperity traded 440,000 shares in June and more than 600,000 in May, he said. I dont see how First Victoria could possibly make the argument that Prosperity was thinly traded. First Victorias heaviest monthly volume to date, he noted, is 200,000 shares.
Bain Slack, an analyst at CIBC World Markets in New York, another firm that covers Prosperity, called the Houston companys offer for FVNB outstanding.
If you look at the trends, Prosperity is clearly a bank that is going places, Mr. Slack said. Its no secret that Im bullish on Prosperity.
Prosperity released its second-quarter results Thursday, posting a profit of $3.57 million, up 35% from the year-ago period. The company earned 43 cents a share, besting analysts estimates by 2 cents. Mr. Zalman said it was Prosperitys best quarter ever.
First Victoria has not yet announced its second-quarter earnings. Its full-year earnings in 2000 rose 10%, to $8.25 million.
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