Now that Norman E. Dean of Pacific Bank and Georges S. St. Laurent of Western Bank have signed a letter of intent to merge, the two chief executives will have to figure out a good rationale for the deal.

"Someplace there have to be synergies, and we will look for them, but it is hard to address right now what those are," said Mr. Dean.

If that seems odd to you, you're not alone.

Banking experts who have followed the proposed acquisition of San Francisco-based Pacific by Western, of Coos Bay, Ore., are shaking their heads in amazement.

The announcement was preceded by a bizarre chain of events, involving a Singapore banking scandal and a purportedly hostile play for the $320 million-asset bank by a foreign investor.

Mr. Dean made the comment about synergy three weeks after he agreed to sell Pacific, a trade finance specialist with operations in Hong Kong and the Cayman Islands.

Not only are Mr. Dean and Mr. St. Laurent unable to explain why they are merging, they have yet to figure out how to finance the transaction, or what to do about the razor-thin capital ratios that would result from the deal and inevitably attract regulatory scrutiny.

Most observers predict the deal will never reach fruition - and may never have been intended to. They are suggesting the pact may have been designed to foil what was perceived as a hostile acquisition bid.

The story began last August, when Hendra Rahardja, the chairman of Bank Harapan Santosa in Djakarta, Indonesia, approached Pacific about a possible merger with California Security Bank in San Jose, of which he is the principal shareholder.

Nothing came of it, so Pacific Bank executives were surprised when in October Mr. Rahardja's common law wife, Cheong Swee Kheng, a citizen of Singapore, bought 9.9% of Pacific stock.

In December she filed a change-of-control application with the Comptroller's office to buy another 20.1%.

According to Mr. Dean, Mr. St. Laurent, Western Bank's CEO, made his merger proposal shortly after the New Year and the letter of intent was announced Jan. 17.

Letters-of-intent are often only required when market rumors start a surge in stock prices, necessitating a rushed announcement.

No such movement took place in this case. Mr. Dean would only say that Mr. St. Laurent requested a letter-of intent. Mr. St. Laurent failed to respond to calls or to questions faxed to his office.

In a letter to the Comptroller's office, dated Jan. 9, Pacific Bank's lawyer, James E. Topinka of Pettit & Martin, complained that Ms. Cheong's intentions went beyond the "investment purposes only" clause she signed in the application.

"The bank is concerned that the close relationship between Mr. Rahardja and the applicant may result in plans for the bank which are not apparent from the publicly available information," he wrote, alluding to a possible takeover.

After hinting that one of the bank's largest shareholders had lied in a federal filing, he wrote that Mr. Rahardja's brother, Eddy Tansil, had been sentenced to 17 years in jail in Indonesia last year for embezzling $430 million from the government-owned Bank Penbanguman Indonesia.

"While we do not mean to imply that Mr. Rahardja may have anything to do with his brother's activities, the bank is extremely concerned that the appearance of association between Mr. Rahardja and his brother and Mr. Rahardja's close association with the applicant may harm the stability of the bank," Mr. Topinka wrote.

Whether Pacific's decision to announce a merger with Western was influenced by the perceived power play from Asia is unclear.

But the timing and nature of the bid have convinced many observers that the deal with Western was a defensive ploy.

Mr. St. Laurent's bank has only $60 million in capital, slightly more than the purchase price.

Officials of Pacific admit this would bring the merged entity's capital ratios precariously near - if not below - federal minimum requirements, although they assert that the problem is not insurmountable.

And the price, at 1.2 times book value, is far below the going rate, even taking into account the fact Pacific Bank has had financial trouble in the past.

A retired Florida real estate developer who took over Western in the mid-1980s, Mr. St. Laurent has pursued a community banking expansion in western Oregon, building up $700 million of assets.

Where he will find the cash to finance the deal is unclear. Two years ago he began building a stake in Pacific, and now controls 9.9% of the shares.

"Why a community bank out of Coos Bay, Ore., should be the logical acquirer for a trade finance bank in San Francisco is beyond me," said an investment banker familiar with the situation. "This guy put them in play," he said, referring to Mr. St. Laurent.

A large Pacific shareholder complained, "I think it is unlikely these guys (Western) making the bids will acquire the company. In fact I think they are trying to steal it."

Mr. Dean, however, emphasized that the bank is willing to entertain other offers. He confirmed rumors that several banks had already contacted Pacific, but would not name them.

"Investment banks are providing fairness opinions, and part of their due diligence is to test the market valuation and I suppose the best of all tests is if someone comes in and pays something more," he said.

"And Mr. St. Laurent is well aware of that," he added.

Last week, the situation took another turn.

The comptroller's office approved Ms. Cheong's application, putting her in a position to acquire enough shares to block any agreement.

The Comptroller's office would not discuss the details of its decision, except to say through a spokesman that "we found no basis for the allegations" in Mr. Topinka's letter.

Although the letter was sent on his behalf, Mr. Dean now denies there is any dispute between the bank and Ms. Cheong, and says she told Pacific executives a few days after the Western merger that she was only interested in the bank as an investment.

"To the best of my knowledge her intentions were only investment purposes and there is no reason to suggest anything else," he said.

Hoefer & Arnett Inc. is advising Pacific Bank, and Natwest Markets is writing a fairness opinion for Western.

Questioned about the combination, Mr. Dean said Western was the No. 1 Small Business Administration lender in Oregon, and Pacific had cautiously approached that business.

"It is a unique combination out of the chute," he admitted. "We will see some institutions combined because of the differences and the opportunity to apply those differences, and that is what this is."

The announcement sent Pacific shares soaring more than 40%, leaving Ms. Cheong's decision to purchase more shares in doubt.

Through her attorney, she would not reveal whether she intended to make the purchases.

Nonetheless, observers were astonished at the Comptroller's office approval - pointing out that federal scrutiny of foreign intrusions in U.S. banks is supposed to have been tightened in the wake of the BCCI scandal.

"If we are concerned about these kinds of things in terms of who owns our banks, and if I were the reviewing regulators, I would have given it a lot more scrutiny," said an investment banker, who requested anonymity.

"Banks in this country have been rammed by foreign ownership of banks before," he added. "They will suddenly lend offshore, and credits go to toast and then they bail the bank."

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