East-West Bank Taking an Unusual Route to Go Public

San Marino-based East-West Bank has asked regulators for permission to become a publicly traded company--but without a first-time sale of stock to the public.

In a recent filing with the Securities and Exchange Commission, East-West asked that millions of dollars of privately traded shares sold in June through a private placement be registered as publicly traded shares by early January.

It’s not the usual way to become a public company, Wall Street specialists said. Most companies do so through an initial public offering. Some go public by purchasing a company that is already publicly traded, often a shell company.

Going public by registering shares of a private placement has little downside except that there are likely to be fewer shares available for trading, analysts said.

“There’s not a lot of liquidity there,” said Charlotte Chamberlain, banking analyst with Jefferies & Co., an investment bank in Los Angeles.

A private placement is a sale of stock, bonds or other investments by a company, usually a privately held one, to private investors, usually large institutions. The stock does not always have to be registered with the SEC.

In this unusual deal, the $238 million raised in the private placement was used to buy East-West Bank from an Indonesian Chinese couple who owned 100% of it. The couple were in a hurry to sell at the time because of the Asian economic crisis.

East-West, with $1.7 billion in assets, is now forming a holding company, and the bank shares sold to private investors could become shares in the publicly traded holding company. The shares are expected to eventually trade on Nasdaq.

Institutional investors, including Merrill Lynch & Co., CIBC Oppenheimer, Wellington Fund and other companies and wealthy individuals, bought the shares.

East-West sold 23.8 million of them at $10 each.

Several other Asian-owned community banks in the Los Angeles area are traded publicly, including General Bank and Cathay Bank.

In July, a much smaller Los Angeles bank, Preferred Bank, which caters mainly to Chinese-Americans, shelved a planned IPO because of market conditions.

The bank, with $385 million in assets, had expected to raise about $20 million by selling about 1.1 million shares. Of those shares, 1 million were being sold by existing shareholders and the rest by the bank.

“The bank is considering trying again in the first quarter,” said James T. Hill, managing director at Sutro & Co. in Los Angeles, lead underwriter on the deal.

Dominic Ng, president of East-West Bank, which now makes the majority of its loans beyond the Chinese immigrant community, could not comment on the East-West deal because the company is in the SEC-imposed “quiet period” before and after a stock sale, when executives are not allowed to discuss their company’s shares.

Ng, who immigrated from Hong Kong in 1977, has said previously that he sees opportunities in financing U.S. companies importing Asian goods and in lending to local entrepreneurs with Asian connections.

East-West, with nearly 400 employees, has 23 branches and is one of the largest banks in the country serving Chinese Americans. Analysts say it is likely to be acquiring smaller institutions, given the continuing consolidation in the financial services sector.

Indeed, on Oct. 21, East-West agreed to buy another bank for $13.5 million, but because the deal has not been finalized, the name of the target company has not been disclosed. Sources say it is a local bank.

East-West, which was formed in 1972, was built on real estate lending. The bank is financing low-income housing in Las Vegas, Burbank, Claremont and other cities. In fact, through the first half of this year, 79% of its business was in real estate mortgages.

In other IPO news, this week looks fairly quiet for initial public offerings from California-based companies as the year of record IPOs nears its end.

“It’s winding down. Of course, [some firms] are still trying to get out this year,” said Gail Bronson, senior analyst for IPO Monitor, a data service in Calabasas. “There will be no dearth of IPOs for January. There are already 21 companies ready to go next month.”

Last week’s successful deals included an IPO by San Francisco-based Xoom.com Inc., which more than doubled in its first day of trading Wednesday, closing at $34.44 a share on Nasdaq.

By Friday, the stock had settled back, closing at $26.13.

Also last week, Infinity Broadcasting Corp., a CBS Corp. unit and the second-largest U.S. radio network, raised an enormous $2.87 billion with its IPO. Infinity, which owns 161 stations in 34 markets, sold 140 million shares--5 million more than expected--at $20.50 each through Merrill Lynch.

On Friday, the shares closed at $23.31 in New York Stock Exchange trading.

The Infinity sale stands as the third-biggest IPO of the 1990s so far. Oil producer Conoco Inc. raised $4.4 billion in October. The decade’s second-largest was from Lucent Technologies Inc., which raised $3.03 billion in 1996.

*

Times staff writer Debora Vrana covers investment banking and the securities industry. She can be reached by e-mail at debora.vrana@latimes.com.