Comerica to Buy Imperial Bancorp
Imperial Bancorp--one of the largest banks based in Southern California--will announce today that it has agreed to be acquired by Detroit banking company Comerica Inc. in a stock swap valued at $1.25 billion.
George L. Graziadio, chairman and chief executive of Inglewood-based Imperial, said Tuesday night that a merger agreement had been reached with Comerica at a price of $27.74 per Imperial share based on Tuesday’s closing prices for both companies.
“Comerica will give us the size to be able to better serve our customers,” Graziadio said.
Imperial has $7.4 billion in assets and 15 branches in the West, including 12 in fast-growing California. Comerica is the nation’s 24th-largest bank, with $41 billion in assets nationwide and a strong focus on commercial lending.
In California, Comerica has 31 branches and $5.3 billion in assets. The combined company would be the fourth-largest bank in the state.
“With this we think we’re going to be someone to be reckoned with in California,” said Comerica Chairman Gene Miller. He noted that both banks emphasize lending to the high-tech and entertainment industries, as well as to small businesses.
Comerica entered the California market in 1991 with a series of acquisitions and has built a substantial business in the state through its San Jose-based Comerica Bank-California.
Comerica has been eyeing California over the last year, announcing plans to open new offices and boost staff.
“Like us, Comerica specializes in middle-market lending,” Graziadio said. Graziadio would become chairman of the combined California operations, which would operate under the Comerica name after the merger is completed. J. Michael Fulton, head of Comerica’s California operations, would serve as president of the combined Comerica-Imperial operations in the state.
Miller said it was too soon to say whether the merger would result in any layoffs, but Comerica expects it would slash Imperial’s expenses by about 20% over the next two years by eliminating duplicative and other administrative costs.
The $27.74 price tag represents a 14% premium over Imperial’s Tuesday closing price of $24.31, up $2.81 a share. Imperial’s stock has risen 56% since Oct. 17. Comerica’s stock closed at $60.31 a share Tuesday, unchanged. Under terms of the proposed deal, Imperial shareholders will receive 0.46 share of Comerica stock for each share of Imperial, Graziadio said.
The deal, expected to close in the first quarter of 2001, is subject to regulatory and shareholder approval.
Speculation about a possible sale of Imperial--a fixture on the Southern California financial scene for decades--has swirled around the bank for years, particularly as founder Graziadio, 81, passed the age at which most executives retire.
Imperial’s position as a lender to entrepreneurial companies in the vibrant Southern California market and elsewhere made the bank an attractive takeover candidate for large out-of-state players interested in breaking into California.
But Graziadio, whose family controls more than 20% of Imperial Bancorp, had resisted a sale until now. But, Graziadio said Tuesday, “I always said if an offer was in the interest of shareholders and the stability of our business, I’d welcome it.”
Analysts said Imperial’s recent credit problems may have played a role in the bank’s decision to find a buyer.
The bank’s stock was hammered this spring by concerns about rising loan problems. In May, Imperial shares sank after the bank warned that loan charge-offs would rise significantly in the second quarter, largely due to the failure of a large worker’s compensation insurer.
But last week, Imperial officials said that the bank’s credit quality is improving, though bad loans rose slightly to $59.9 million as of Sept. 30, compared with $56.1 million as of June 30.
Graziadio and Imperial Vice Chairman Norman Creighton emphasized Tuesday that Imperial has made adequate provisions for its loan problems.
Miller said Comerica examined 80% of Imperial’s loan portfolio and “we feel comfortable with what we’ve been able to see.”
Graziadio, a former shopping mall developer, launched Imperial Bank with his real estate partner George M. Eltinge in 1963, funding the new institution with a $1.25-million investment. Eltinge died in 1994 at age 76.
Graziadio said he opted to start his own bank out of frustration with the poor service that large banks were offering small businesses and entrepreneurs such as himself.
Imperial specializes in making loans to specific niches of major industries, including film production.
In addition, Imperial also has bet heavily on the technology sector, providing financing to risky tech start-ups in exchange for lucrative stock warrants in the firms.
Not all of Imperial’s unconventional ventures have succeeded. A spinoff of Imperial Credit Industries in the mid-1980s, for example, burned many investors. Today Imperial Credit’s stock has skidded to under $2 a share, below the company’s book value.
More recently, the bank’s 56% stake in Official Payments Corp., which contracts with the Internal Revenue Service to allow citizens to pay their taxes with credit cards, looked promising at first. But in April, the Stamford, Conn.-based firm’s stock sank 70% on news that its chief financial officer had resigned and its business was slowing.
