Chinese-American Banks Are at The Fore of Recent Dealmaking
WALL STREET WEST
Despite a weak mergers and acquisitions climate, local banks serving the Chinese-American market have seen a rash of recent buying and selling.
Smaller banks are being sold to larger institutions because of capital restraints or to bring liquidity to bank founders who are near retirement.
Early this month, UCBH Holdings Inc. of San Francisco agreed to buy First Continental Bank of Rosemead for roughly $50 million in stock. UCBH, parent of United Commercial Bank, has $4.8 billion in assets and 11 branches in Southern California, including four from its purchase of Bank of Canton last year.
Privately held First Continental has $334 million in assets and four branches. First Continental Chairman Alan Thian will stay on at UCBH, directing Southern California operations. The deal is expected to close during the third quarter and will increase UCBH’s per-share earnings by 1.5 percent, according to UCBH Chairman Thomas Wu.
East-West Bancorp Inc., another lender focused on the Chinese-American market, acquired turnaround play Pacific Business Bank, which focuses on commercial real estate lending, for an undisclosed price.
Dominic Ng, East-West’s chairman and chief executive, said the acquisition would add 4 cents to 6 cents a share to the company’s 2003 earnings per share of $2.25 to $2.30.
UCBH and East-West are considered the most ambitious growers among California’s ethnic Chinese banks, but other Asian institutions are branching out as well.
Chinatrust Bank of Torrance recently bought the charter of Express Bank of Alvin, Texas, and plans to move into the Houston market to serve Chinese-Americans.
In addition, California Chohung Bank of Los Angeles acquired its two New York branches that were separately owned and changed its name to CHB America Bank, a unit of Chohung Bank of Seoul.
In another recent transaction, TriCo Bankshares of Chico, with assets of $1.3 billion, bought North State National Bank, also of Chico, for $33 million in cash and stock.
Homestore Inc., the Westlake Village-based online real estate information provider, warned in a 10K filing that it could be delisted from the Nasdaq SmallCap Market if it doesn’t get its stock price up.
In a filing with the Securities and Exchange Commission, Homestore said it must maintain a minimum stock price of a $1 for at least 10 consecutive business days during a 180-day period that began March 11. The company’s stock closed at 55 cents a share on April 9. The last period of 10 consecutive days it closed above $1 was Jan. 13 through Jan. 27.
Homestore said it could apply for a 180-day extension of the requirement if it met tests of stockholders’ equity, market capitalization or slight operating profits. The company’s stockholder equity of $38 million at the end of 2002 meets the test level of $5 million, and its market capitalization of $62 million last week was just above the $50 million threshold. But it lost $176 million last year.
Homestore has been working to put to rest a financial scandal that upset shareholders and business partners, and drew a broad SEC investigation that resulted in criminal guilty pleas by several of its former executives. It moved to the Nasdaq SmallCap from the National Market in November.
If it is unable to continue trading there, Homestore said in the filing it would have difficulty raising capital. (Most companies that fall off Nasdaq end up trading on the “pink sheets.”) Another potential problem is a pending shareholder class-action lawsuit whose lead plaintiff is the California State Teachers Retirement System. The company may yet have to pay substantial damages in connection with the litigation, it said.
“Regarding Nasdaq, our objective is to maintain our listing,” said Chief Executive Mike Long.
Sharpe Manufacturing Co., which calls itself “The Spray Gun People” because of its dominance in the market for paint spraying equipment, has been sold to Graco Inc. of Minneapolis, a leader in commercial finishing equipment.
Santa Fe Springs-based Sharpe retained Barrington Associates for the sale but did not disclose the deal’s value. Michael McCourt, Sharpe’s president and chief executive, said the company “received a favorable multiple of cash flow.”
McCourt, a shareholder, plans to step down in September and will be succeeded by John Mazzotta, who was named general manager of the Sharpe division of Graco.
Sharpe was founded in 1922 and was primarily owned by members of the Alan Sharpe family. The deal closed on April 1.
PacifiCare Health Systems Inc. recently came to terms with the Texas Department of Insurance and the state’s attorney general in a long-running dispute over unpaid medical claims.
The agreement requires PacifiCare of Texas Inc. to comply with that state’s prompt-pay law. Cypress-based PacifiCare said it plans to pay a $1.5 million fine, $1.5 million in administrative costs and $1.25 million in legal fees as part of the settlement.
Texas law calls for health maintenance organizations to promptly pay doctors for their services. Texas officials early last year sued PacifiCare over alleged violations of the law.
Texas agreed to stop pending probes relating to the lawsuit for up to 12 months while PacifiCare resolves liabilities relating to insolvent Texas medical groups.
If settlement conditions aren’t met, litigation could resume. PacifiCare also agreed to halt its legal proceedings against the state.
Officials said the agreement allows PacifiCare to resolve some outstanding claims from doctors during the bankruptcy proceedings of PacifiCare’s own Fort Worth-based Medical Select Management, as well as Heritage Southwest Medical Group, which processed doctors’ claims for PacifiCare.
Orange County Business Journal