Zions Bancorp has agreed to buy Laguna Hills, Calif.-based bank holding company Eldorado Bancshares Inc. in a stock swap deal valued at $190 million.
Eldorado's two banking subsidiaries, Eldorado Bank and Antelope Valley Bank, will be merged into Zions' subsidiary California Bank & Trust, the sixth largest bank in California with $6.9 billion in assets and 75 branches.
Eldorado's shares closed Thursday at $8.62 before the merger was announced but were up a whopping 44 percent at $12.50 in mid-morning trading Friday. Conversely, Zions' shares were down 2.85 percent in midmorning trading Friday at $56.50.
Eldorado Bank is the largest independent bank based in Orange County, Calif., with 16 full-service branches. Antelope, with headquarters in Lancaster, Calif., operates eight full-service offices in Los Angeles, San Bernardino and Kern counties.
"We feel there is an opportunity to grow our Orange County division to approximately $2 billion, which is similar to the size of our San Diego, L.A. and Bay area divisions" said Robert Sarver, president and CEO of California Bank & Trust. After the deal is closed — expected in the second quarter of 2002 subject to approvals by government regulators and Eldorado shareholders — California Bank & Trust's market share in Orange County will double to about 5 percent, ranking it fourth largest.
Directors, executive officers and principal shareholders of Eldorado, who together own 58 percent of the shares, have agreed to vote in favor of the deal, making shareholder approvals moot.
Eldorado has given Zions an option — described by the two companies as "customary" in such deals — to acquire 19.9 percents of its its common shares under certain, but unspecified, circumstances.
Robert Keller, president and CEO of Eldorado, said the merger was a "tremendous opportunity" for the company's shareholders, customers and employees, noting that California Bank & Trust "operates relatively autonomously (from Zions Bancorp) with its own board of directors, management and products."
The acquisition will be structured as a tax-free stock swap in which each share of Eldorado will be converted into 0.23 share of Zions. Based on Zions' closing price Thursday of $58.16, that values each Eldorado share at $13.38, a 55 percent premium.
California Bank & Trust Co. expects to reduce its costs by 20 percent following the merger, which would make Eldorado's cash efficiency ratio about the same as California Bank's today.
Eldorado will pay a dividend of 5 cents per share on Jan. 24 to shareholders of record Dec. 29. Also, whenever Zions declares a record date for a dividend payment on its common stock that is prior to the deal being closed, Eldorado will be allowed to pay its shareholders a dividend that is not greater than the equivalent dividend, rounded to the nearest cent, of the among of the dividend paid by Zions.
Eldorado's proxy statement may be read on the Internet at www.sec.gov or by calling Romolo Santarosa at Eldorado, 949-699-4344.
Zions also will file a registration statement with the Securities and Exchange Commission at www.sec.gov and Jennifer Jolley at Zions, 801-524-4877.
E-MAIL: max@desnews.com