Security Pacific to Buy Southwest Bank
Los Angeles-based Security Pacific Bank, which was rebuffed in an earlier attempt to acquire Southwest Bancorp, on Thursday agreed to purchase the Vista-based parent company of Southwest Bank for $32 million, or $6 a share.
The preliminary agreement was announced after the stock market closed Thursday. Earlier in the day, Southwest closed up $.125 at $4. A definitive agreement is expected in 10 days, with regulatory and shareholder approvals to follow in six months, Southwest President Frank Mercardante said Thursday.
The proposed $32-million bid by Security Pacific “is 2.4 times Southwest’s book value, and that’s a good multiple in the current environment,” Mercardante said. “From a customer standpoint, it’s going to be a positive move.”
Southwest Bank has $375 million in assets and 14 branches in San Diego County. Security Pacific is California’s second-largest bank, with $78 billion in assets.
About 50 of Security Pacific’s 560 branches are in San Diego County. The proposed acquisition fits with Security Pacific’s previously announced plan to expand its presence in this rapidly growing area, according to industry analysts.
Thursday’s board vote evidently ended a flurry of bids for Southwest. Wells Fargo first surprised Southwest Bank with an unsolicited offer Dec. 8. Security Pacific made its first offer Dec. 22, when Southwest’s board rejected both offers.
Southwest’s board accepted Security Pacific’s latest offer after a review by Shearson Lehman Hutton, the New York-based investment banking firm that Southwest hired late last year following the unsolicited offers.
Southwest’s board had planned to review the company’s “corporate strategy” during a previously scheduled Thursday board meeting, Mercardante said. “We reviewed our strategy and this offer was one option,” Mercardante said. “The board accepted it.”
Southwest Bancorp reported an $89,000 net loss for the third quarter ended Sept. 31, an improvement from the $2.4-million loss reported during the corresponding quarter the year before. Southwest Bancorp reported a $1.2-million net loss for the first nine months of 1988, against a $3.6-million net loss for the like period the previous year.
Mercardante suggested that Security Pacific’s proposed acquisition of Southwest “is indicative of what you’re going to be seeing as we get closer to 1991” when many out-of-state banks will be allowed to begin banking operations in California.
“Most of the (bigger) banks are going to try and increase their franchise totals along with their market penetration” in San Diego County, Mercardante said.
