Hints at Foreign Buyer : Chief Makes It Official: Union Bank Up for Sale
In an unusual memo to employees, the chairman of Union Bank of California has confirmed that the state’s fifth-largest bank is for sale and he speculated that the purchaser is likely to be foreign.
John F. Harrigan, chairman and chief executive of Union Bank, issued the internal memo to buttress employee morale following a spate of news stories that said the bank’s owner, London-based Standard Chartered, was seeking a buyer for Union.
Rumors have been circulating for weeks in financial circles that Standard Chartered would sell Union to raise capital to cover the parent’s losses on foreign debt.
Some rumors have the bank going to Wells Fargo & Co., which is itching to expand in Southern California. Others suggest that only a foreign buyer, such as a Japanese bank, could afford to pay what is expected to be a premium price of 2 to 2 1/2 times book value for Union--a price estimated at somewhere between $1.5 billion and $1.9 billion.
The Los Angeles-based bank is particularly appealing to prospective purchasers because of its enviable niche as a major business bank in the growing Southern California region. In addition, the bank is not burdened by large international loans because it sold most of those to Standard Chartered in 1984.
Union Bank has 32 offices in California, and its holding company, Union Bancorp, also owns the fourth-largest bank in Arizona, United Bank of Arizona. The holding company has total assets of $12.2 billion.
A spokesman said Harrigan was out of town Wednesday and was not available for comment. But bank employees confirmed that the memo was an attempt to allay concern among the bank’s 4,500 employees after several recent press stories.
The story that probably caused the memo was a piece in the San Francisco Chronicle last Friday quoting anonymous sources who said that Wells Fargo was negotiating with Standard Chartered on a possible purchase of Union Bank.
Union Bank employees were upset at the prospect of an acquisition by Wells Fargo because it would probably mean a repetition of what occurred last year when Wells bought Crocker National Bank, according to sources within Union. When Wells acquired Crocker, 1,600 Crocker employees were laid off immediately and nearly 3,000 more jobs have been eliminated.
The Harrigan memo, dated last Friday and distributed this week, began: “As I’m sure you are aware, there have been several rumors circulating recently concerning the potential sale of Union Bank and/or Union Bancorp. The factual information is that our parent company, Standard Chartered, announced on Tuesday, Aug. 18, that it made a special loan-loss provision to cover cross-border lending. As a result, it plans to sell assets to raise capital ratios. The assets being considered for sale include Union Bank/Union Bancorp.”
Harrigan went on to say that some press accounts of the potential sale had been “responsible and accurate,” while others relied on “rumor, speculation and unattributed quotes.”
After agreeing with the premise of the articles that Union will command a premium price because it is an attractive and valuable institution, Harrigan used some unattributed quotes of his own: “Most informed sources believe that only a foreign organization is likely to pay that premium,” his memo said. “Most also believe that a foreign investor would continue to operate Union Bank as it is today.”
* California’s fifth-largest bank, specializing in business loans to the middle market.
* Part of a holding company owned by Standard Chartered PLC of Great Britain. Holding company, Union Bancorp, also owns United Bank of Arizona, a Phoenix institution that is the fourth-largest bank in that state.
* Assets of $9.5 billion as of Dec. 31, 1986; $9.2 billion at the end of the second quarter of 1987.
* Headquartered in Los Angeles with 4,500 employees.
* Thirty-two regional offices in California (does not refer to them as branches).
