City National Strikes Deal to Acquire First Los Angeles Bank : Finance: $85-million cash sale is hailed by analysts. City National itself had been seen as takeover candidate.

City National Corp. said Thursday that its City National Bank unit agreed to acquire First Los Angeles Bank for $85 million in cash, in a deal that puts some of City National’s excess capital to work and bolsters its niche among wealthy Southern Californians.

Although analysts praised the deal, it apparently disappointed some investors who figured City National for a takeover candidate. Those investors had been betting that Bram Goldsmith, the company’s 72-year-old chairman, chief executive and holder of 16% of its stock, was ready to sell out.

City National stock dropped 50 cents a share Thursday, to close at $13.375 on the New York Stock Exchange.

The First Los Angeles deal scotches the Goldsmith retirement talk, “or at least pushes out the timetable,” said analyst Campbell K. Chaney of Rodman & Renshaw in San Francisco. “I think Bram still likes what he’s doing.”

Goldsmith himself laughed at the idea in a telephone conversation. “We’ve been identified as that [a takeover target] for the 20 years I’ve been chairman!” he roared.

After the sale closes, perhaps by year-end, City National will probably close four of First Los Angeles’ 10 offices and may lay off as many as half its 300 employees, Goldsmith said.

First Los Angeles, based in Century City, has assets of $882 million. It is owned by San Paolo Bank Holding of Turin, Italy. San Paolo, like City National, caters to an upscale clientele, with 10 offices in Southern California.

First Los Angeles last spring sued the group that owns the Los Angeles Kings hockey team, charging that they are liable for fraudulent activities by former Kings owner Bruce McNall and others that cost the bank money.

Goldsmith said he will not inherit the McNall dispute, but will leave it to San Paolo to pursue. As another part of the deal, San Paolo will buy back $60 million worth of commercial real estate loans that Goldsmith said he does not want.

City National, with 16 offices in Southern California, had assets of $2.8 billion and equity of $351 million as of June 30. That’s much more equity than the bank needed, Chaney said, and he applauded City National for putting the excess to work by making the all-cash acquisition.