Falling Security Pacific Stock Price Threatens Santa Clarita Bank Deal

Security Pacific Corp.’s planned acquisition of Santa Clarita National Bank could be in danger because of the falling price of Security Pacific’s stock.

Los Angeles-based Security Pacific announced in March that it agreed to acquire the Valencia-based bank, which has 11 branches, for about $52.5 million worth of stock.

But according to an amended agreement reached last week with Security Pacific, Santa Clarita National could back out of the acquisition if Security Pacific’s stock price averages less than $26 for the five days before the closing date. Security Pacific’s stock closed at $22.75 on Monday.

Santa Clarita National’s shareholders will vote on whether to approve the amended deal at a meeting on Oct. 26.

The original agreement called for Security Pacific essentially to issue enough stock to keep the deal worth $52.5 million but capped the total number of shares that could be issued.

But Security Pacific’s stock--like that of many banks nationwide--has fallen steeply, from about $37 per share late in March to its current price of $22.75. At that price, even the maximum number of shares payable under the original agreement would be worth far less than $52.5 million.

Last week, Security Pacific amended the agreement to keep the value of the deal at $52.5 million as long as Security Pacific’s stock is worth $30 per share or more.

But the amended agreement would also allow Santa Clarita National the option to back out if Security Pacific’s stock was below an average of $26 for the five days prior to closing. At $26 per share, the new maximum number of shares payable would be worth only $45.5 million.

Jim McDevitt, executive vice president of Santa Clarita National, declined to comment on whether the Valencia bank’s board might refuse to go through with the deal. But he said Santa Clarita National has “a great deal of confidence that the deal will come off without a hitch.”