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THE ORLANDO SENTINEL
Crown Wins SouthTrust Branches
By Richard Burnett | Sentinel Staff Writer
October 14, 2004
Casselberry-based R-G Crown Bank outbid a pack of competitors to reel in 18 SouthTrust Bank branches in Florida and Georgia for an estimated $145 million, banking officials said Wednesday.
Crown, one of the region's fastest growing financial institutions, said the deal would more than double its presence in Florida by adding about $630 million in assets and $320 million in deposits. The transaction is expected to close in the first quarter of 2005, pending regulatory approval.
The deal also hinges on the merger of SouthTrust and Wachovia, officials said.
Wachovia announced a plan in June to acquire SouthTrust in a $14.3 billion stock deal. Regulators required SouthTrust to sell the branches before the merger could be approved, citing antitrust and competitive concerns. The banks hope to gain approval by March. Crown expects its changeover to be complete before then.
"Wachovia and SouthTrust want our conversion to be done and out of the way so they can complete their merger as well," said Jack Koegel, president of Crown, now the third-largest financial institution headquartered in Central Florida.
The thrift outbid several larger financial institutions to capture the deal, he said. Federal regulators did not disclose names of the other bidders. Most of the branches are in Jacksonville and Lakeland. One is in DeLand, and three are in Augusta, Ga.
The branch buyout is the latest and most aggressive expansion by Crown since it was acquired in mid-2002 by R&G Financial Corp., a multibillion-dollar mortgage-banking conglomerate based in San Juan, Puerto Rico.
Boosted by R&G Financial's deep pockets, R-G Crown has launched major commercial and consumer-lending programs in recent years. Its assets have doubled to almost $1.5 billion and deposits have jumped 73 percent to $825.8 million.
The addition of the SouthTrust branches would propel Crown to more than $2.1 billion in assets and $1.15 billion in deposits.
They will allow the bank "to expand our existing footprint" in Central Florida and other markets, said Victor J. Galan, chairman and chief executive of R&G Financial.
R-G Crown officials said the thrift is paying a 20 percent premium to acquire the new branches.
Industry analysts expected the premium to range between 15 percent and 18 percent, according to Jack Greeley, a bank-mergers expert and partner in the Orlando law firm of Smith Mackinnon. But Crown probably considers the higher price to be justified because it fits their growth strategy and provides entrance into new markets, he said.
"If it involved just one or two branches, this would be a very, very pricey transaction," Greeley said. "But since it is essentially an entire branch network, that puts you in a whole different pricing arena."
The deal received plaudits from some Wall Street analysts. A 20 percent premium is about average for many of the banking industry's recent acquisition prices, according to Avi Barak, who follows R&G Financial for the Sandler O'Neill investment-banking firm in New York.
"I like it," said Barak, who has a "buy" rating on R&G Financial. "This will definitely accelerate their growth in Florida and other markets in the United States."