CPF sweetens bid 40%
Central Pacific Bank's
Honolulu-based parent is offering
$400 million for City Bank's parent
Central Pacific Financial Corp., frustrated in its yearlong attempt to buy its downtown Honolulu rival, raised its offer 40 percent yesterday to about $400 million and gave City Bank's parent a deadline to accept the deal.
The new cash-and-stock offer was the third since April 16, 2003 when the stock was trading at a split-adjusted $42.16. The latest offer is valued at $87.26 a share for each share of CB Bancshares Inc. stock. Central Pacific's previous offer was worth $285 million, or $70 a share, at Friday's market close.
Shares of City Bank's parent rose as high as $73.51 yesterday after the announcement but ended up $1.30 at $69.85. The stock closed Friday at $68.55.
Central Pacific, which announced the offer in an investor conference call at 3 a.m. yesterday Hawaii time, said it sent a letter to CB Bancshares stating that the offer will remain open until April 15.
Clint Arnoldus, chairman, president and chief executive of Central Pacific, said that if the two sides have not begun negotiations by then, Central Pacific will cease pursuing the merger "at this time" and immediately begin a buyback of up to $20 million of CPF's own stock.
"We truly hope City Bank's management and board will reconsider discussing the combination of our banks with us and allow their shareholders a fair opportunity to consider our offer," Arnoldus said. "We believe that leaving our offer open until April 15 will allow City Bank sufficient time to consider our offer carefully. It will also enable City Bank shareholders to express support for our offer to City Bank's board in the event their board continues to resist it."
CB Bancshares spokesman Wayne Miyao said yesterday the bank's board of directors will review Central Pacific's proposal.
In January, CB Bancshares took out newspaper advertisements claiming the stock was worth $109 a share and, following the release of its fourth-quarter earnings later that month, revised its fair value for the bank to $126 a share.
Central Pacific, which first approached CB Bancshares last March before making the proposal public a month later, undertook an aggressive media blitz and sought legal remedies to try to force the hand of CB Bancshares' board.
In recent months, though, Central Pacific has changed strategies and pursued federal and state regulatory approvals, which it received. The federal approval was extended three months yesterday by the Federal Reserve Board.
Central Pacific, trying to get across the message that it wants a "friendly" merger, also resisted the strategy of nominating an opposing slate to run for the CB Bancshares' board of directors at CB's April 29 shareholders meeting.
"It's always been our desire to have a friendly, negotiated merger," Arnoldus said. "We again invite City Bank to sit down with us and iron out any potential issues during negotiations."
Arnoldus said Central Pacific wants to work with City Bank's board to address social issues, "which we've already proven we're willing to do by promising to protect jobs and open new branches to offset the closure of overlapping branches."
As of Dec. 31, Central Pacific, the fourth-largest bank in the state, had 24 branches, 506 employees and $2.1 billion in assets. CB Bancshares, the fifth-largest bank, had 22 branches, 547 employees and $1.9 billion in assets. A merger would create the state's fourth-largest bank.
Analyst Brett Rabatin, who covers Central Pacific for Nashville, Tenn.-based FTN Midwest Research, said he thought it was a "relatively good" offer but that CB Bancshares' stock wasn't trading near the offer price because of the previous reluctance of CB's management and board to consider the deal.
"What's notable is CPF is not being hostile," Rabatin said. "It's a good-faith offer -- please come negotiate with us.
"I think the stock has not responded given that the market most likely anticipates CBBI unwilling to negotiate a transaction with CPF even if it would be for the better of the employees, the shareholders and Hawaii."
Central Pacific's latest cash-and-stock offer contains the same $22.27-a-share cash component of its previous proposal, but increases the stock portion to 2.4 shares from 1.6005 shares of CPF stock for each share of CB Bancshares stock.
Central Pacific, which spent $10.6 million last year on the merger attempt, had been facing increased pressure from its shareholders to resolve the deal as its stock languished. The shares, which rose 86.7 percent in 2002, gained just 9.4 percent in 2003 as the uncertainty of the merger weighed down the stock. Central Pacific's stock fell 82 cents yesterday to close at $26.26.
CB Bancshares, meanwhile, spent $6.6 million defending the hostile takeover last year.
The bank's stock, fueled by last year's takeover offer, ended 2003 with a gain of 62 percent.
Central Pacific Bank
City Bank