Partners Trust Financial Group Inc. of Utica, N.Y., says its deal to buy BSB Bancorp Inc. of Binghamton is still on - even though a subscription stock offering fell far short of raising enough money to fund the $347 million deal.
On Thursday, Partners Trust announced a solution. To hit its number the $1.3 billion-asset company is opening the stock sale to the general public, including institutional investors.
The mutual holding company needs to sell at least 14.9 million shares at $10 each to buy the $2.2 billion-asset BSB. It said it had sold about 6 million - including 1.4 million to its employee stock option plan - in the subscription offering.
Participation was limited to current shareholders, depositors in its SBU Bank, and residents of the communities where SBU has branches. Partners Trust said it received more than 4,000 orders.
Though it sold less than half of the shares it needed to, it gave no indication that the BSB deal had fallen behind schedule. When announcing the deal in December it had said it would close in mid-2004.
In a news release Thursday, Partners Trust said it expects to receive the necessary shareholder, depositor, and regulatory approvals within two weeks. And president and chief executive officer John A. Zawadzki seemed unfazed by the results of the subscription offering.
"We're very pleased with the level of confidence that our customers, shareholders, and community have shown in the offering and in our organization," he said in a press release. "We look forward to completing the offering and the BSB Bancorp merger."
Rexford C. Decker, BSB's executive vice president and chief financial officer, did not return telephone messages Friday. Steve Mahler, a Partners Trust spokesman, answered one message with another, but a call back reached an answering machine that said he would be unavailable for the rest of the day.
The stock sale would complete the bank's conversion from a mutual institution to one wholly stockholder-owned. Recently such second-step conversions, in which the holding company sells its majority stake in itself, have fared much better than Partners Trust's.
In March, for example, New Haven Savings Bank took 23,000 orders from its depositors alone, raising a whopping $1.02 billion. (After its conversion and acquisition of two banks in April, New Haven Savings changed its name to NewAlliance Bancshares.)
Since March anxiety about an impending interest rate hike has dampened enthusiasm for thrift stocks in general and for Partners Trust in particular. Analysts said investors view its large portfolio of fixed-rate mortgages as a cause for concern.
Its stock price has fallen by nearly 50% since hitting a 52-week high of $40.78 on Feb. 18. The stock remained at $20.70 Friday as the stock markets were closed in observance of former President Reagan's funeral.
The decline in its share price has clearly put a damper on Partners Trust's subscription offering, since investors - in the case of a second-step conversion - use a company's current stock price to gauge the market value of the new stock it is selling.
According to Theodore P. Kovaleff, an analyst with Sky Capital LLC in New York, many investors were concerned that if Partners Trust had sold the "super max" allotment of stock it had available, 23.1 million shares, their market value would have fallen about $3 below the $10 offering price - hardly an inducement to buy.
Partners Trust seems to have addressed those fears by announcing Thursday that it would sell no more than 17.5 million.
Charlie Miller, the principal at the Birmingham, Ala., investment banking firm Sterne, Agee & Leach Inc., said the expertise of Partners Trust's investment banker, Sandler O'Neill & Partners LP, and the limit on shares for sale should enable the mutual to sell enough for the BSB deal.
He added that investors' concerns about the stock's market value will be outweighed by the expectation that eventually a larger company will buy Partners Trust, earning them a premium.
"The general presumption is that it will sell itself," Mr. Miller said.
