Central Pacific parent CPB Inc. is offering $285 million to buy the stock of City Bank parent CB Bancshares Inc., according to filings this morning with the Securities and Exchange Commission. The offer is equivalent to $70 per share for City Bank shares, a premium of 51 percent over today's closing price of $46.38 per share.

City Bank officials said this morning they could not comment on the proposal. Central Pacific said the banks had been negotiating for at least a month over a possible merger — and that City Bank officials had rejected Central Pacific’s offers.

“We are very disappointed CB Bancshares Inc.’s lack of response to our ... offer to combine,” CPB chairman Clint Arnoldus said in a letter addressed to CB Bancshares president and CEO Ron Migita. CPB said it wants to negotiate with City Bank, but “it is prepared to take the proposal directly to the shareholders” if City Bank management doesn’t agree to the takeover.

Although City Bank’s management did not agree to the merger, the largest City Bank shareholder did.

“The offer is an extremely attractive proposition for CB’s shareholders,” said Joro Shirai, director of TON Finance, CB Banchares’ largest shareholder with 8.9 percent of the company’s shares.

To be complete, the merger must be approved by both companies’ stockholders and pass muster with regulators. City Bank management rejected an initial CPB proposal on March 17, according to CPB’s filing. The two parties met on April 2, but came to no agreement, CPB said.

Arnoldus, who also is president and chief executive officer of CPB, said the combination of companies is “the right fit at the right time.”

If the merger is approved, the combined bank would have total assets of $3.7 billion, deposits of $2.8 billion and a stock market capitalization of $600 million.

CPB officials said the combined company would probably shed some jobs and branches, as many of the two banks’ functions would overlap. The cuts would most likely come from the City Bank side, according to the Central Pacific SEC filing.

“We hope that employees of City Bank will be interested in positions within our combined company. ... We expect some degree of consolidation,” the filing stated. “But it’s too early to discuss specifics since we would first need to sit down with City Bank management to work out the details.”

Central Pacific is Hawai‘i’s fourth largest banking company, with 500 employees, 24 branches and $2.03 billion in assets. The 21-branch City Bank, which also has 500 employees, is the fifth largest, with $1.67 billion in assets.

The new bank would still be smaller than the three major Hawai‘i banks: Bank of Hawaii, First Hawaiian Bank and American Savings Bank, which together control the lion’s share of Hawai’i banking. But CPB said the bank would be better equipped to compete with its larger rivals.

“This combination would help us grow and enhance our ability to compete with the larger banks,” the filing stated.

CPB said the combined bank would have better economies of scale, with expanded business banking and wealth management services, a larger branch and ATM network and larger lending limits.

CPB expects a one-time $32 million charge to earnings related to the transaction costs, but estimates the merger would add 10 percent to its earnings in 2004.

CPB was founded in 1954 by a group of local Japanese Americans and developed a strong relationship with Japanese bank Sumitomo, which at one point controlled a substantial portion of the stock and picked many of the bank’s chief executives.

But Sumitomo gradually reduced its role, and under the leadership of former CPB president Joichi Saito, Central Pacific restructured its operations beginning in 1999, shedding employees and revamping its services. Since then, the bank’s earnings have steadily improved and its stock price has doubled.

Saito retired last year and was replaced by current president Clint Arnoldus, a banker from California.

CB Bancshares, in its present form, was created by the 1993 merger of smaller companies City Bank and International Savings & Loan. Key directors and stockholders include members of the Tokioka family, longtime members of the Hawai‘i financial and insurance community.

CB Bancshares has also performed well on the stock market in recent years, and its assets and earnings have also grown. The company has suffered some credit quality problems with non-performing loans, but CPB said those risks would be “more than manageable” by the combined bank.