Hanmi Financial to Buy Pacific Union
Solidifying its position as the nation’s largest Korean American community bank, Hanmi Financial Corp. agreed Monday to acquire rival Pacific Union Bank in a cash and stock deal valued at nearly $300 million.
Los Angeles-based Hanmi Financial is the holding company for Hanmi Bank, which has assets of more than $1.7 billion.
Pacific Union, also based in L.A. and the oldest Korean American bank, has assets of almost $1.1 billion.
The combined bank would be the 19th largest among banks headquartered in California and would hold a commanding 43% share of the state’s Korean American banking market, according to Carpenter & Co., an Irvine-based investment bank specializing in financial institutions.
Hanmi officials said the company would keep its headquarters in Los Angeles, home to about one-third of the nation’s more than 1 million Korean Americans.
Korean community banks have been able to charge customers a premium for the staff’s knowledge of the Korean language, expertise on immigration rules and knowledge of foreign trade issues -- and still be rewarded with customer loyalty, explained Edward Carpenter, chairman of Carpenter & Co.
“The Korean community supports Korean banks and contributes to their earnings more strongly than any other ethnic group in California,” Carpenter said.
At the same time, the combined entity should be able to compete for business “far beyond the Korean community,” said Erica Kim, president of the Korean American Chamber of Commerce of Los Angeles.
Under terms of the proposed deal, which is subject to shareholder and regulatory approval, Hanmi would pay $164.6 million in cash to acquire most of the 62% stake in Pacific Union now owned by Seoul-based Korea Exchange Bank.
All other outstanding Pacific Union shares, including the remaining shares held by Korea Exchange, would be swapped for 6.1 million Hanmi shares.
Based on Hanmi’s closing price Monday on the Nasdaq Stock Market of $21.30, the deal would have a total value of $295 million -- or $27.63 per Pacific Union share. Pacific Union’s stock closed at $24.63 on Nasdaq on Monday.
The deal was announced after the close of trading.
The merger would result in cost savings of $10.9 million -- a 17% reduction in the combined companies’ expenses -- to be phased in over 18 months, according to a joint statement from the two banks.
A Hanmi representative declined to comment on whether any of those cost savings would be achieved through layoffs. But one person with knowledge of the transaction said job cuts probably would be part of the equation.
Hanmi officials said they expected the transaction to hurt their company’s per-share earnings in 2004 but that it would add to earnings in 2005.
Hanmi and two other Korean American banks are among the top 10% of performers in terms of return on equity among banks in California over the last five years, Carpenter said.
The efficiencies offered by the combined bank should produce even stronger results, he said.
The consolidation, Carpenter noted, follows a trend established by Chinese American banks, which have undergone five mergers in the last year and a half.
