A former chief executive officer of Grafton State Bank wants to buy it back from Merchants and Manufacturers BanCorp. Inc. in New Berlin, Wis., the multibank holding company that has owned it since 1999.
Ralph L. Zaun, who retired as Grafton's CEO about a decade before its sale, said he feels so confident the bank his grandfather founded a century ago would be better off independent of Merchants that he has offered $20 million to get it back. Related Link
Mr. Zaun, 86, said he and about 10 other local businesspeople got together to make the offer. All were shareholders in Grafton before it was sold to Merchants in an all-stock transaction, leaving them with an investment in what he said is a poorly performing company.
"The stock has turned out to be dismal," he said.
Merchants' shares were trading at $28.25 late Monday and are down about 19% in the past year. The stock hit a high of $46 a share about three years ago.
Mr. Zaun said that he owns a little more than 1% of Merchants' shares but does not know how much the group owns collectively. "We, as former shareholders of Grafton State Bank, would like to get our bank back," Mr. Zaun said. "The holding company is very poor. It has an enormous, costly bureaucracy, and there go the profits."
Merchants reported a fourth-quarter profit of $23,000 versus a $74,000 loss the year earlier. It earned about $4 million last year, about 22% less than in the previous year.
Part of the plunge can be attributed to Grafton, where profits fell by 50% last year, to $1.3 million. Grafton added $1.5 million to its loan-loss reserve in December because of a development loan to a longtime customer, Mr. Murry said.
He acknowledged that Merchants got a letter from Mr. Zaun telling asking whether the board would consider selling Grafton. But Mr. Murry said the letter did not mention a price.
"There was no offer," he said. "The letter asked if we would consider selling Grafton. We would not."
Grafton plays a key role in Merchants' multi-pronged plan to improve its performance, Mr. Murry said. The company intends to double in size in the next two years, both by internal growth and acquisition. It also plans to sell two out-of-state charters to focus solely on its home state, a plan it revealed last quarter and expects to complete in late April or early May. He said the company intends to announce initiatives to cut costs and boost earnings at that time.
Meanwhile, Mr. Zaun said he intends to wage a proxy fight at the May 14 shareholders' meeting. His goal is to bring in new management or to persuade Merchants to sell itself.
