Central Pacific
bids for City Bank

A merger would create a bank
with combined assets of $3.7 billion

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By Dave Segal
dsegal@starbulletin.com

Central Pacific Bank parent CPB Inc. has made a formal offer to buy rival CB Bancshares Inc., parent of City Bank, for approximately $285 million, or $70 a share.

The merger would combine the fourth- and fifth-largest banks in Hawaii and create a company with combined assets of $3.7 billion, deposits of $2.8 billion, loans of $2.4 billion and a market capitalization of $600 million. After a merger, CPB would remain Hawaii's fourth-largest bank in terms of total assets.

CPB said today it is offering CB Bancshares shareholders a 54 percent premium based on the stock's closing price Monday of $45.60. The deal would give CB Bancshares shareholders 30 percent cash and 70 percent of CPB stock for each share of CB Bancshares stock they own. That translates into $21 and 1.8956 shares of CPB stock for each CB Bancshares share.

Clint Arnoldus, chairman, president and chief executive of CPB, said the offer is "a good deal" for shareholders, but that CB Bancshares' management has been "very unresponsive." CPB said it has attempted several times in the past to merge the two banks, but has been rebuffed in its efforts.

"We've had several deadlines they've basically ignored," Arnoldus said about this latest merger attempt. "We want to be able to sit down and get this deal closed. We're certainly ready to exercise options to get it done, but I wouldn't classify it as a hostile offer at this point."

Jiro Shirai, director of TON Finance B.V., CB Bancshares' largest shareholder, is supporting the deal. He and another entity close to TON own roughly 14 percent of the company's shares. CPB owns 2.25 percent of CB Bancshares stock.

"TON Finance believes the offer is an extremely attractive proposition for CB's shareholders, and that the merger of these two Hawaii banks is a logical step forward and should create a much stronger institution," Shirai said.

Arnoldus said the merged company, which will retain the name CPB Inc., would give shareholders a different set of investors due to the stock's listing on the New York Stock Exchange. In addition, he said the stock would have more liquidity.

"I think City Bank shareholders will love this deal," Arnoldus said. "I think they'll want this accepted. This is very, very compelling for every constituency in the state. It's good for this state, good for the shareholders of both banks, good for the customer and good for the employees. It's win-win."

Central Pacific, founded in 1954, has 24 branches on four islands and its focus has been commercial lending. City Bank, founded in 1959, has 21 branches and has concentrated on home lending.

CPB's stock closed down 26 cents today at $25.30 on the NYSE while CB Bancshares' stock rose 88 cents to $46.38 before being halted shortly before closing. CPB's stock, up 86.7 percent last year, is down 7.8 percent this year. CB Bancshares' stock, up 32.7 percent last year, is up 9.1 percent this year.

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Central Pacific Bank
City Bank