Posted on: Saturday, May 10, 2003

City Bank gets new CPB offer for buyout

By Andrew Gomes
Advertiser Staff Writer

Central Pacific Financial Corp. sweetened its buyout offer of City Bank yesterday, increasing the portion of cash and reducing the amount of stock offered to City Bank shareholders, though the total value of the deal remains about the same.

Central Pacific said it "replaced a great offer with an even better offer" by increasing the cash portion of its bid from 30 percent to 35 percent, or from $21 to $24.50 per share, and reducing the portion of stock from 70 percent to 65 percent, or from 1.89 shares to 1.76 shares.

But stock and merger analysts said the move was more likely a way to delay a key shareholder vote.

"This was a very clever tactic that has nothing to do with ... the value of anything," said Scott Keller, president of Deal Analytics, a financial research firm in New York that assesses takeovers. "The whole point was to call for a new special shareholders meeting."

City Bank had set a special shareholders meeting for May 28 to consider Central Pacific's hostile takeover bid. Central Pacific complained that didn't give shareholders enough time to consider its proposal, and asked for a date in late June.

By withdrawing its original offer, Central Pacific left nothing to vote on at the May 28 meeting, and a new meeting will have to be scheduled.

Central Pacific needs more than 50 percent approval to advance its bid.

Larry Goeas, senior vice president at A.G. Edwards & Sons, said it appeared that Central Pacific wanted to start over with a different time frame for consideration of the merger opposed by City Bank officers and directors.

"I don't know what the advantage is (in the new offer)," Goeas said.

Wayne Kirihara, Central Pacific senior vice president and manager of marketing and sales development, said the extra cash increases the portion of known value for shareholders because the price of Central Pacific stock fluctuates. He said his company will have to raise an additional $14 million to pay for the roughly $280 million deal if it is completed.

Kirihara also said Central Pacific was concerned that some of the thousands of City Bank shareholders would not be able to make an informed decision on the proposed merger, but a vote date change was not the main purpose of the replacement offer.

Wayne Miyao, City Bank senior vice president and spokesman, said he could not immediately respond to Central Pacific's revised offer.

The new offer's total consideration is $70.10, based on the closing price of Central Pacific stock yesterday. The previous offer's total consideration was $70. Both values were adjusted to account for a 10 percent stock dividend scheduled to be paid to City Bank shareholders.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.