Hostile Offer a Rarity in the Industry : Bank of New York Bids $1.46 Billion in Effort to Take Over Irving Bank

Mounting one of the few hostile takeover bids in banking history, Bank of New York Co. offered $1.46 billion in cash and stock Friday for Irving Bank Corp., parent of Irving Trust Co.

If completed, the deal would rank as the nation’s largest bank merger, and would create the 11th-largest bank holding company, with assets of more than $40 billion.

Irving Bank, which on Thursday rejected a friendly merger proposal, said its board was studying the offer and would respond “in due course.”

The price of Irving’s stock leaped $25.75 a share to $78 in heavy trading Friday, while Bank of New York’s rose $1.50 to $43.375.

Unfriendly takeover bids for banks were unheard of until recently, because they were believed to be frowned on by regulators and because of the “friendly, clubby atmosphere among bankers themselves,” said James McDermott, analyst with the investment firm of Keefe, Bruyette & Woods in New York.

But growing competition, consolidation of the industry and more relaxed attitudes among regulators have changed that. In deals already proposed by banking firms this year, Wilmington Trust has made an unsolicited merger offer to Delaware Trust Co., and Marshall & Ilsley Corp. has bid for Marine Corp. of Wisconsin.

Under the proposed transaction, Bank of New York would pay $80 a share cash for 47.4% of Irving’s shares, and 1.9 shares of its common for each of the remaining 52.6%.

Bank of New York already owns 4.9% of Irving’s common stock.

Bank of New York is seeking the merger as a way of expanding key lines of business the banks share--trusts, securities processing, corporate banking and retail banking, said J. Carter Bacot, Bank of New York chairman and chief executive. He said the banks could quickly realize substantial economies by cutting overhead and paring marketing costs in their New York area operations.

“With the growth of super-regional banks all around us, you’ve got to become bigger if you want to stay competitive,” he said in an interview.

Bacot said Bank of New York has held intermittent talks with Irving Bank for the past four years and had found Irving management somewhat receptive to its arguments. Bacot said he proposed several kinds of combinations, including a stock swap in which they would have merged as equals.

Bacot again approached Joseph A. Rice, Irving Trust’s chairman, on Wednesday. However, Rice called back on Thursday to tell Bacot that he had polled board members and that they “totally rejected” the offer, Bacot said.

“I don’t know how many (board members) he actually called, or what they told him,” Bacot said. “I do hope their board will rethink this.”

Bank of New York officials made no secret of their plans to shrink Irving if the merger bid succeeds.

Among other moves, the officials said, they would sell Irving’s landmark headquarters building at 1 Wall Street, which they believe could bring profits of $225 million.

“You can see why the Irving executives might be nervous,” said Judiah Higgins, analyst with Tucker, Anthony & R. L. Day.

While the banks are comparable in size, Bank of New York is the more successful of the two, with a 16% return on equity, compared to Irving’s 12%, Higgins said.

“Irving’s been a sort of puzzling underperformer; Bank of New York thinks they can do something about that,” Higgins said.

Bank of New York, founded by Alexander Hamilton, has assets of $22.2 billion and deposits of $17 billion. Irving Bank Co., a holding company with 12 banks, has assets of $24.2 billion and deposits of $15.5 billion.