Chairman’s Exit Douses Sale Talk At GBC Bancorp
By ANTHONY PALAZZO
Li-Pei Wu has resigned as chairman of GBC Bancorp, according to sources within and outside the bank holding company settling, at least temporarily, a boardroom battle over whether to sell the parent of General Bank, one of L.A.’s oldest Taiwanese-American-run banks.
As of late last week, a successor to Wu hadn’t been named. The board was holding its regular monthly meeting last Thursday, and GBC is scheduled to report its fourth quarter earnings on Jan. 23.
“An announcement on this subject may be part of (the earnings announcement) or it may be separate,” said Peter Lowe, GBC’s chief financial officer.
Wu, who is 68, joined GBC in 1982, and has been chairman of the holding company since 1998. He shed his role as chief executive to his longtime No. 2, Peter Wu (no relation), two years ago, and his planned exit as chairman, when his employment contract ran out at the end of December, was envisioned as an orderly transition.
However, as the Business Journal reported last June, Li-Pei Wu spent much of his final year courting potential buyers for the bank. His efforts, which resulted in at least two offers, turned GBC’s boardroom into a battleground with Li-Pei Wu on one side and Peter Wu, a member of the bank’s founding family, leading the other.
Under Li-Pei Wu’s contract, which expired on Dec. 31, Wu stood to receive approximately $6 million in stock-option windfalls if he secured a sale agreement by that date. Despite support from some large outside shareholders, Li-Pei Wu couldn’t convince a majority of the board to go along with offers that were said to reach above $40 a share.
Some money-losing investments, for which Li-Pei Wu has shouldered most of the blame, hurt the company’s value. This, combined with the founding Wu family’s staunch opposition to a sale, prevented any agreement from being reached.
GBC’s stock has hovered around $20 since August; recently it traded for $19.50. It has fallen from about the mid-$30s range earlier in the year.
In April, GBC disclosed $27 million in losses due to participation in syndicated loans that turned out to be fraudulent. It recently disclosed plans to write down $8.2 million in aircraft lease investments to United Airlines, which filed for Chapter 11 bankruptcy protection in December. In August, the company also closed a New York loan production office that initiated most of the ill-fated transactions.
Under terms of his contract, Li-Pei Wu stopped being an officer or employee of the company as of Dec. 31, Lowe said.
Lowe said the employment contract didn’t affect Li-Pei Wu’s status as director of GBC. Others within and outside the bank said Li-Pei Wu was no longer chairman.
According to an outside source, Li-Pei Wu sent a letter to the board in mid-December, resigning as chairman but indicating he would remain a director. He is also said to have cleaned out his office. Efforts to reach Li-Pei Wu were unsuccessful.
Two outside sources said Li-Pei Wu tried to attract one last bidder prior to his resignation. According to one of these sources, the board softened its previous opposition to a sale. However, it countered the recent offer, said to be in the mid-$30s per share range, with one that was too rich for the bidder, and the talks ended.
The question now is whether Li-Pei Wu will go away quietly or regroup and make an attempt to force a sale of the company from the outside. Li-Pei Wu has been active in Taiwanese politics for years, and could try to step up his activities in that arena.
However, he still owns about 3 percent of the bank’s shares, and he has support from institutional shareholders who would prefer a sale at a reasonable premium to the stock’s current price to a turnaround effort that could stretch for several years.
Peter Wu and his family, who hired Li-Pei Wu to lead an earlier turnaround effort in 1982, own approximately 13 percent of the bank’s shares. Sources familiar with his position say Peter Wu is determined to forge ahead with another revamp, rather than sell at a price he considers to be too low.
At current prices, GBC’s stock is valued at 1.1 times book value. Comparable local banks such as East-West Bancorp and Cathay Bancorp have stock prices trading at 3.1 and 2.6 times book value, respectively. With a comparable valuation of just 2.5 times book value, GBC’s stock would be worth nearly $45.
A pending resolution to Li-Pei Wu’s status could be behind the company’s silence on his resignation to date. Often times, a company will reach an agreement with a departing executive that bars hostile actions or any activities that compete with the company.
There is no way of knowing whether such negotiations are under way, and even if an agreement is reached, it doesn’t have to be disclosed until the company files its annual 10-K form, which GBC typically does in late March.