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The Honolulu Advertiser
Posted on: Tuesday, May 8, 2001

BancWest accepts acquisition offer by French bank

By Frank Cho
Advertiser Staff Writer

BancWest Corp.'s board of directors voted unanimously last night to accept an offer by France's biggest bank to acquire the Honolulu financial services company for about $2.5 billion in cash.

 •  BancWest chief sees big profit

Walter A. Dods Jr., 59, the chairman and chief executive of BancWest, saw his net worth jump by about $14 million after BNP Paribas of France offered to buy BancWest for $35 a share yesterday.

Dods owns about 1.5 million shares of BancWest, including options, according to a company spokesman.

BancWest shares rose $9.33, or 37 percent, to $34.31 after news of the pending sale. If Dods sells his shares to BNP Paribas at $35 each, he will be sitting on a $52.5 million nest egg. Dods paid about $23 million for those shares, so he would also be facing a hefty tax bill for his approximately $29.5 million gain.

The move by Paris-based BNP Paribas SA, the biggest single shareholder of BancWest Corp. with 45 percent of outstanding stock, would take the $19 billion Hawai'i bank private while expanding BNP's growing reach into the U.S. retail banking market.

The French bank's purchase of Hawai'i's oldest bank also is something of a final step in a transformation that essentially began three years ago when it first bought a stake in the institution.

Now, while shareholder and regulatory approval is still needed, the parent company of First Hawaiian Bank edges closer to being part of the 10th largest bank in the world.

BNP yesterday offered $35 a share for the 55 percent of the bank it doesn't already own — a 40 percent premium over BancWest's Friday close. Its share price soared on the news, closing at $34.31, up nearly 40 percent from Friday's closing price of $24.98.

Change invisible to patrons

The buyout, which is largely expected to be approved, will leave BancWest, which is also the parent company of San Francisco-based Bank of the West, as a privately held company that will not have to regularly report its financial performance or significant events, but will still have to follow federal banking regulations.

The deal is expected to close in the third quarter, BancWest said.

For the average Hawai'i customer, however, not much is expected to change. The bank said operations will remain independent and no changes are expected at the branches.

"The change will be invisible to our customers. They'll be served by the same employees at the same branches. Only the BancWest stockholder will change," said Walter Dods, BancWest's chairman and chief executive officer.

BNP said in a statement last night that BancWest's recent financial performance and banking expertise led it to increase its investment.

"BancWest has an impressive record of growth, profitability and customer service and we'll continue to count on its management team to further develop the bank's network and activities," said Michel Pebereau, chairman and chief executive officer of BNP.

BancWest performing well

The move to acquire BancWest was attractive because it is a "low-risk" transaction, analysts said. Since the French bank acquired its 45 percent stake in BancWest three years ago, the Honolulu company has met all of the projections made at the time of the merger.

On top of double-digit earnings for the past three years, BancWest has increased its size by 40 percent, increased its efficiency ratio to 52.9 percent from 65.5 percent in 1997, improved its return on average equity to 22.26 percent, and ranked in the top half of the 50 biggest U.S. banks for return on average assets.

"The headquarters of First Hawaiian Bank will remain in Hawai'i and the bank board will continue to include substantial representation of Hawai'i residents," Pebereau said. "In addition, there will continue to be Hawai'i representation on the BancWest board."

BNP also said it plans to make a $5 million contribution to the First Hawaiian Foundation once the deal closes.

Of BancWest's 20 board members, nine are appointed by BNP.

"While the event wasn't a surprise, the timing was, given that it was this soon," said David Winton, a New York-based bank analyst with Keefe Bruyette & Woods Inc.

For three years, BNP's holdings were limited to 45 percent of BancWest's outstanding common stock after the merger between First Hawaiian Inc. and the parent company of Bank of the West.

Under that agreement, BNP was prohibited from acquiring more shares without the consent of a majority of BancWest's independent directors. BancWest's independent directors authorized BNP to submit its proposal yesterday.

"With the slowdown in the U.S., banks are probably cheaper at the moment than they have been for a while," said Philippe Leonnard, a banking analyst at Fortis Securities France, who has a "buy" rating on BNP Paribas shares. "It's good timing."

Banking analysts said BNP has wanted to expand its retail banking business internationally, and acquiring BancWest is one way to do that.

"If you are in Paris and watching the stock price of BWE (BancWest) going up and up and up, that creates all the reason you need to pick up the phone and make the call to buy the rest of the bank," Winton said.

First Hawaiian to remain

BancWest "is a company, a market and a management we know," said BNP Paribas chief operating officer Baudouin Prot. "The risk to shareholders in, say, emerging markets is much greater than in the U.S."

BNP Paribas aims to use BancWest, which has 252 branches and 1.1 million customers, to sell banking and insurance products in the United States, Prot said. The Federal Reserve gave the French bank status as a financial holding company on April 2, which allows it to sell insurance in the United States for the first time.

In addition to its operations in California and Hawai'i, BancWest has branches in Oregon, Washington, Idaho, New Mexico and the Pacific islands of Guam and Saipan.

Dods, 59, who has been chief executive officer of BancWest since 1998 and First Hawaiian since 1989, will remain chief executive, and BancWest, formerly First Hawaiian Inc., will maintain its headquarters in Hawai'i as a subsidiary of BNP, according to a statement released by BancWest last night.

Analysts said BNP has traditionally allowed Bank of the West, and later BancWest, freedom to operate and they expect that to continue.

"Through our relationship with BancWest, we have had a great deal of confidence in the people of BancWest and in Walter Dods, Don McGrath (president) and the management team," Pebereau said.

As of March 31, BancWest had assets of $19.4 billion, and was ranked the 36th biggest U.S. bank. It posted a 25 percent increase in first quarter 2001 net income, to $61.7 million.

BNP Paribas has a market value of $38.1 billion.