Would-Be Holding Company May Cancel IPO

Newly formed Pacific Community Banking Group may shelve plans for a public offering and turn to private investors to fund the acquisitions of two community banks in Southern California.

The Laguna Hills-based company had hoped to buy Bank of Hemet (Calif.) and Valley Bank, in Moreno, by raising $80 million through a public sale of more than three million shares.

Pacific Community said choppy market conditions threaten to scuttle the deals-and perhaps the company's future.

E. Lynn Caswell, chairman and chief executive officer of Pacific Community, said he has approached a half-dozen private investment groups about putting up the funds needed to buy the two banks. At the same time, he said, he is trying to restructure the terms of both deals. With the drop in bank stocks, each is now worth less, he said.

In July, Pacific Community agreed to buy Bank of Hemet for $58.50 a share in cash and Valley Bank for $12.50 a share. The two banks control a combined $375 million of assets and 12 branches in Riverside County.

Despite the market turmoil, Mr. Caswell said he is not ready to throw in the towel.

"We'd like to keep these deals alive," he said. "The market has played havoc on this transaction, but there is a good chance we can keep it together."

Analysts are skeptical about a private equity infusion or an IPO, citing the lack of savings in the transactions and purchase accounting that would produce too much goodwill.

"It's a tough deal to pull off," said Scott Burford, principal at Burford Capital, an institutional brokerage house in La Crescenta, Calif., that trades small bank stocks.

Pacific Community, formed this year, does not yet operate any banks. But Mr. Caswell said the long-term strategy is to grow into a multibank holding company with $1 billion of assets.

The company had planned to file public offering documents with the Securities and Exchange Commission shortly after Labor Day, but it still has not done so.

A decision on whether to go ahead with the public offering will be made this month, he said.

Mr. Caswell, a longtime California banker, previously served as vice chairman of Western Bancorp, a fast-growing Southern California banking company.

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