Stock analysts laud
City Bank acquisition
The analysts who cover Central Pacific Financial Corp. gave two thumbs up yesterday to its $420 million merger with City Bank's parent.
Joe Morford of RBC Capital Markets and Brett Rabatin of FTN Midwest Research had long been skeptical that a deal would happen after CB Bancshares Inc. spurned Central Pacific's advances for more than a year. But they said Central Pacific's decision last week to extend its deadline provided notice that a merger could be in the works.
"I'm a little surprised they get along now," said Rabatin, who's based in Nashville, Tenn. "But I'm happy for them. I think it's a great deal."
Clint Arnoldus, chairman, president and chief executive officer of Central Pacific, said the combined company would realize $19.5 million in annual cost savings through consolidation and efficiencies.
Rabatin said it remains to be seen if the savings assumptions are aggressive or not, but that overall "the math works from an acquisition perspective."
"The two companies fit well," Rabatin said. "One of the reasons Central Pacific was so adamant about trying to make this deal work is because basically it makes a lot of sense."
Morford, though, said he still wants to see how well the companies will work together and deliver the synergies that they talked about.
"With the cost savings, there's a fair amount of execution risk," he said. "It's not like either company has a lot of experience in the integration of large mergers."
Analysts weren't the only ones speculating yesterday about the combined bank's future. Employees of the two banks found out about the deal when they woke up yesterday morning.
One City Bank employee, who wished to remain anonymous, said he saw the announcement on television but the only information he had was from a press release he read when he arrived at the bank. He said other employees were in the same situation and no one knew how their jobs would be affected even though Central Pacific promised no layoffs.
The banks had intended to share the merger news with employees before making a general announcement, but fears of an information leak prompted them to put out a press release at 5:10 a.m. yesterday.
Arnoldus said yesterday that the merger would result in some employees being reassigned because of overlapping duties.
"Where some people are reassigned, we will have a program that will be there for them on a voluntary basis," he said. "If they elect to utilize it, it will be very fair to them and help them find another opportunity, if they elect to look at other opportunities rather than look at a combined bank."
Arnoldus reiterated that there are 10 branches of the combined company that are close to each other, but it was too early to determine which ones would be closed.
"There will be some branch consolidation in this process," Arnoldus said. "But our commitment is to open new branches whenever we close any of those 10. At some point in the future, we'll have a smaller number than (the 45 branches) combined now, but we'll be back up to it in the long run."
Arnoldus, who will be CEO of the new company, said the transition will be seamless to customers of both banks.
"Obviously, there will be some product integrations, some system integration, but we're going to make that so it's not disruptive to their business," he said.
CB Bancshares President and CEO Ronald Migita, who will become nonexecutive chairman of the new bank, said the combined bank will continue to focus on consumers as well as small- to mid-size businesses.