City Bank workers' future still unclear
By Deborah Adamson
Advertiser Staff Writer
Top executives of Central Pacific Financial Corp. and City Bank parent CB Bancshares will reap big rewards in the merger, but prospects for their 1,000 employees appear less certain.
Advertiser library photo
While Central Pacific remains committed to no voluntary layoffs as a result of the merger, the bank said in a letter to employees, "It is too early to say which employees will retain his or her same job and whether one's job location will change."
Central Pacific CEO Clint Arnoldus, right, with Ron Migita, faces the task of saving money without laying off employees.
What's also unclear is whether employees who might be asked to change positions would be offered one at a comparable level and pay. In addition, it's uncertain whether distance would be taken into consideration for displaced employees.
"We just started our integration process, and it's really premature to answer these detailed questions," said Ann Takiguchi, spokeswoman for Central Pacific.
The challenge confronting Central Pacific CEO Clint Arnoldus is keeping his no-layoff pledge and still generating the expected $19.5 million in annual savings after the banks combine. He had told Wall Street analysts that the savings would come from operating efficiencies and workforce attrition.
Takiguchi said that both banks are seeing a 20 percent natural attrition in the workforce and that should result in savings in compensation and benefits.
Theresa Idowu, manager of City Bank's Kane'ohe branch, faces the possibility of being relocated since her branch is across the street from a Central Pacific location.
But Idowu said she would adjust if the bank moves her. A resident of Salt Lake, she said she has been making the long drive to Kane'ohe for years.
Idowu said she is optimistic about the changes.
"I believe it's a win-win," she said. "We did our crying and sharing. It's just accepting what is."
Idowu said employees can always walk away if they don't like the position they are offered.
"If they don't like it, they can get severance pay," she said. "The severance is pretty good."
Last month, Central Pacific and the parent of City Bank announced plans to merge. City Bank executives had fought the deal for nearly a year, but accepted after Central Pacific increased its offer. The merger of the parent companies is expected to close in August, according to a Securities and Exchange Commission filing Thursday.
When the merger is complete, City Bank shareholders will own 42 percent of the merged company.
If City Bank ends the merger under certain conditions, it would have to pay a termination fee of $12.52 million.
The merger also triggers golden parachutes for certain top executives at City Bank. Such clauses in contracts provide large benefits in the event of a merger or takeover.
CB Bancshares CEO Ron Migita, who will become a non-executive chairman of the merged company, will receive $3.5 million with his departure. Richard Lim, president and chief operating officer of CB Bancshares who will join the new company, stands to get $11.5 million.
Central Pacific's Arnoldus will get a bonus of $1.08 million for completing the merger.
The purchase of City Bank was estimated at $395 million — $88.6 million in cash and $306.4 million in stock, according to the SEC filing. Other merger-related costs amount to $58.5 million — including executive payouts and employee severance and retention costs.
Central Pacific plans to raise $65 million in cash from maturities and sales of investment securities, $30 million in the form of debt called trust preferred securities and $6.5 million from the exercise of CB Bancshares stock options it owns.
The combined company will pay a dividend of 16 cents, which is what Central Pacific currently pays. City Bank pays a dividend of 36 cents.
Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
