First Hawaiian to merge
with big California bank

The $1 billion deal means that
a French company will own 45 percent
of the local company's stock

By Russ Lynch
Star-Bulletin

First Hawaiian Bank and California's fifth-largest bank, Bank of the West, will merge into one company worth more than $1 billion, the banks said today.

The arrangement will make a French bank holding company, Banque Nationale de Paris, the biggest single shareholder in the surviving company, according to a joint statement released today by the companies.

The deal involves First Hawaiian Inc.'s acquisition of BancWest Corp., the parent of 104-branch Bank of the West.

BancWest's owner, Banque Nationale de Paris, will get 29.5 million shares of First Hawaiian Inc. in exchange for 100 percent ownership of BancWest.

At today's closing price of $37.50 for First Hawaiian stock, that makes the deal worth $1.11 billion.

When the deal is closed, Banque Nationale will own 45 percent of First Hawaiian Inc., making it the biggest shareholder above the Damon Estate and Alexander & Baldwin Inc.

The banks said, however, that the merger agreement includes a "standstill" arrangement in which the French company will not buy shares that bring its First Hawaiian ownership beyond 45 percent.

First Hawaiian Inc. will be the surviving company and headquarters will remain in Honolulu, but the company's name will change to BancWest Corp. "reflecting its regional scope," this afternoon's announcement said. But First Hawaiian Bank and Bank of the West will retain their current names.

Walter A. Dods Jr., 57, chairman and chief executive officer of First Hawaiian, will have the same role and titles in the new corporation. Don J. McGrath, 49, president and chief executive officer of Bank of the West, will be president and chief operating officer of the merged company.

He will continue as CEO of Bank of the West and will work out of his office in San Francisco.

First Hawaiian, in its statement, described it as the largest stock deal in Hawaii's history. Looking at one indicator, the value of the capitalization in the market, the new BancWest will be Hawaii's biggest company.

In listed assets, however, it will be about a billion short of Pacific Century Financial Corp., parent of Bank of Hawaii, which has assets of $14.8 billion.

First Hawaiian's assets of $8.15 billion and BancWest's of $5.8 billion add up to $13.95 billion.

BNP bought Bank of the West in 1980.

Today's statement said the boards of directors of both banks have approved the merger.

The merger also requires approval by First Hawaiian shareholders and banking regulators. Assuming those approvals are obtained, it should take place in the last quarter of this year, the banks said.

The companies expect to cut annual operating costs by 9 percent or $41 million by the year 2000 by merging First Hawaiian's Oregon-Idaho-Washington subsidiary, Pacific One Bank, with Bank of the West.

The statement said earnings should increase immediately at First Hawaiian.

Before today's announcement, Bloomberg News, citing sources close to the deal, reported that the addition of the mainland branches would add 20 percent to First Hawaiian's cash earnings in the first year of such a combination.

First Hawaiian Inc.'s principal subsidiary, First Hawaiian Bank has 59 branches in Hawaii, two in Guam and one on Saipan. Its Pacific One Bank subsidiary, based in Portland, Ore., has 38 branches in Oregon, Washington and Idaho.

There has been speculation about the future of Hawaii's big banks as a wave of mega-mergers in the financial industry swept the country this year.

For example, NationsBank Corp. and BankAmerica Corp. are merging in a $64.8 billion deal to create a coast-to-coast bank and banking giant Citicorp is planning a $75.7 billion merger with brokerage and insurer Travelers Group Inc.

Bank of New York in April made an unsolicited buyout offer of $21.8 billion for Mellon Bank but withdrew it last week when Mellon's management refused to discuss it.

The stock market's reaction initially was negative, cutting the price of First Hawaiian's stock by 6 percent to close yesterday $36.75. Action was mixed today, pushing First Hawaiian all the way up to $41 at one point. But First Hawaiian closed at $37.50, up 75 cents for the day.

http://www.fhb.com
http://www.bankofthewest.com