Citicorp Agrees to Acquire Union Bancorp Subsidiary
Citicorp, the nation’s largest banking company, said Thursday that it has signed an agreement to acquire United Bank of Arizona, a subsidiary of Union Bancorp of Los Angeles.
The price of the transaction was not disclosed, but sources at Union said Citicorp agreed to pay $208 million for the Arizona bank. Union Bancorp, also the parent of Union Bank of California, acquired United Bank slightly more than a year ago for $335 million.
John F. Harrigan, Union’s chairman, told the company’s Los Angeles staff in a memo that the sale would not stop efforts by the holding company’s owner, Britain’s Standard Chartered, to sell Union Bank.
Purchased Bank in 1985
Union Bank, California’s fifth-largest bank with assets of about $9 billion, has been for sale for several months because the British company is trying to strengthen its capital base. There have been rumors that Wells Fargo of San Francisco and several Japanese banks have expressed an interest in acquiring the bank, but no deal has been completed.
Union Bancorp signed its agreement to buy United Bank in the fall of 1985, just after Arizona approved legislation opening the state to acquisitions by out-of-state banks. Many big out-of-state banks, including Citicorp, were competing for a foothold in Arizona then, which meant that Union paid a premium price.
The law did not go into effect until October, 1986, and the acquisition was completed Jan. 8, 1987. By that time, United and many other Arizona banks were suffering losses from bad real estate loans and their growth had slowed. Coupled with the stock market crash last October, the changes meant that Union apparently took a hefty loss on the sale of United to Citicorp.
United Bank operates 40 offices in Arizona and has assets of $2.3 billion. Like its Los Angeles affiliate, United Bank specializes in serving mid-sized business customers.
Earnings Not Released
The bank’s fourth-quarter earnings have not been released yet but income at the end of the third quarter was down dramatically from a year earlier though the bank remained profitable.
The deal was negotiated between Citicorp and representatives of Standard Chartered, according to a Union Bank spokeswoman. Negotiations with prospective purchasers of Union Bank have also been conducted through headquarters in London.
Citicorp, parent of New York’s Citibank, said United will be merged with its much smaller Citibank Arizona, creating the state’s fourth-largest bank with assets of about $3.3 billion. Citicorp also operates a thrift subsidiary in California.
