‘Oui’ are Still Family
Only three years after BancWest Corp. and First Hawaiian Bank said ‘yes’ to a merger, a Paris bank pitches a new proposal.
It’s a business story with tremendous magnitude, and it involves the acquisition of a 143-year-old local institution by a major foreign corporation. Here’s the deal: on May 8, Paris-based BNP Paribas ($646 billion in assets) announced that for $2.45 billion, it would purchase the 55 percent BancWest Corp. (parent company of First Hawaiian Bank and Bank of the West) shares it did not yet own. BNP Paribas already had been BancWest’s largest single shareholder (45 percent) since 1998.
BancWest minority stockholders as part of the acquisition receive $35 in cash per share, representing a 40 percent premium to the bank’s closing price of $24.98 on the day of the announcement. “Based on the $35 per share offered by BNP Paribas, our share price will have risen nearly 80 percent in less than two years,” says Walter A. Dods Jr., chairman and chief executive officer for BancWest Corp. “Since we work for our shareholders, I’m extremely proud of that.” When discussions between Dods and BNP began in the first quarter of this year, the French bank-holding company originally had offered $32 in cash per share of BancWest common stocks. It was two months later on May 4 when BNP Paribas directors submitted a proposal to acquire BancWest stocks for $35.
BNP Paribas is a global leader in financial services and banking. Headquartered in Paris with assets of $646 billion and shareholders equity of approximately $19.3 billion, it operates branches in 87 countries. BancWest Corp. is the offspring of a Nov. 1, 1998, merger between Bank of the West and First Hawaiian Inc. The $15 billion marriage, which put BancWest shares on the New York Stock Exchange, created a powerful duo that oversaw more than 200 branches in Hawaii, California, Washington, Idaho, Oregon, Guam and Saipan. Operating earnings for the bank last year was a record $217 million, more than 18 percent over 1999.The acquisition is subject to regulatory approval, but executives anticipate the deal will close by the end of this year. Once finalized, BancWest’s common stock no longer will be listed on the New York Stock Exchange.
Industry watchers are confident that old relationship will help in the new transition. “I don’t foresee much change,” says Dave Winton, analyst for Keefe, Bruyette and Woods. “The guys who ran Bank of the West had a long-standing relationship with Paris. And it has typically been the case that they were kept in the loop on all big, strategic decisions.” Once the June 8 acquisition is finalized, not only will it privatize BancWest, but it will make BNP Paribas the only beneficiary of BancWest’s future earnings.The San Francisco-based Bank of the West is no stranger to European banking. Prior to its 1998 merger with First Hawaiian, the California bank was a wholly-owned subsidiary of BNP Paribas (known as Banque Nationale de Paris at the time). BNP Paribas had 45 percent ownership of the new company after the merger.
The acquisition mirrors BNP Paribas’ desire to grow its international retail banking operations and expand its presence in the West Coast. It also allows the French company to cross-sell in consumer finance, insurance products, asset management and private banking. “They see an increase in their value of BancWest stocks from when we did the merger two and a half year ago,” says Honolulu-based John K. Tsui, vice chairman and chief credit officer. “They like what they see, they like management.”
Tsui and Dods entered into a termination protection agreement scheduled to take effect immediately after the acquistion. It expires three years later. Two other BancWest executives also are under termination protection agreements: Howard H. Karr, executive vice president and chief financial officer, and Donald G. Horner, executive vice president. That certainly will give BancWest executives time to reorganize and magnify its presence in the U.S. mainland.The benefits are mutual for both BancWest and BNP Paribas. “With the help of a world-class bank like BNP, we’re now positioned to become one of the super-regional banks in the U.S,” Dods says. “I don’t have an exact deadline, but over time, we want to become a top-25 bank in the U.S., based on asset size, becoming even more efficient and profitable as we do. That would mean more than doubling our size.”
Not that they already haven’t. In fact, these executives boast a number of acquisitions over the past few years. In its first acquisition (May 1996), First Hawaiian acquired 31 West One Bank and U.S. Bank branches in Oregon, Idaho and Washington. The banks were divested from a previous merger between U.S. Bancorp and West One Bancorp. “We were criticized for that,” Tsui recalls about the $600 million deal. “People would ask. ‘Why are you leaving Hawaii to go to the mainland of all places?’ But by the time we merged with Bank of the West (1998), that $600 million was about $1 billion. We proved that not only can we run a West Coast bank, but we could do it successfully.”
The following year after the formation of BancWest Corp., the company on July 1, 1999, completed a $180 million merger with SierraWest Bancorp, the parent of SierraWest Bank. Not only did it give BancWest access to the Nevada market, but the merger also allowed the bank’s loan operations to seal ties with the U.S. Small Business Administration. SierraWest, with branches in northern Nevada and California, is one of the nation’s leading loan specialists for the SBA. Then on Sept. 14, 2000, BancWest announced plans to acquire 30 First Security Bank branches in Nevada and New Mexico, along with $1.2 billion in deposits and $300 million in agriculture, commercial and consumer loans. First Security Corp. had divested the branches in a previous merger with Wells Fargo & Co. The deal closed in October 2000, while the sale of the branches became final in the first quarter of 2001.
More recently, BancWest’s subsidiary First Hawaiian Bank on June 1 signed an agreement to purchase three Union Bank of California branches on Guam and Saipan, plus their loans and $200 million in branch deposits. The acquisition— still pending regulatory approval—affects 88 Union Bank employees in the Mariana Islands. “That was a corporate opportunity for us from a financial standpoint, because we plan to stay on Guam and Saipan, where we have been for over 30 years,” says Horner. “We view them as Neighbor Islands to our home office in Honolulu.” The Union Bank acquisition brings First Hawaiian’s market share in the Mariana Islands to No. 3, behind Bank of Hawaii.
BancWest officials say that in the past, they targeted West Coast banks with assets of between $500 million and $1.5 billion. But analysts say the price range has escalated, thanks to BNP’s strong influence in the financial community. “We’ll continue to look for acquisitions in our geographic footprint in the Western states,” Dods says. “With BNP behind us, we should be able to consider larger deals. But any deals have to make financial sense — we are not going to buy size just for size’s sake.”