Transactions
May 30, 2001
Merger Marks African-American Milestone
His latest deal is a "roll up" with national significance, Andrew Erskine says. Erskine's client, Founders National Bank, which is the only commercial bank in Los Angeles owned by African-Americans, completed a merger with Boston Bank of Commerce earlier this month.
Erskine's client, Founders National Bank, which is the only commercial bank in Los Angeles owned by African-Americans, completed a merger with Boston Bank of Commerce earlier this month.
The deal creates the country's third-largest privately held bank owned by African-Americans.
"This deal represents a consolidation in banking in the African-American and Caribbean-American communities," says Erskine, a partner at Los Angeles' Manatt Phelps & Phillips who specializes in commercial transactions in the financial-services industry.
"The strategy is to roll up small banks in urban communities into a single institution with numerous branches in various markets," he says.
One of those small banks is Peoples Bank of Commerce of Miami, which Boston Bank acquired in 1999 and which has a large Caribbean-American clientele.
The merged bank is the first African-American-owned financial institution to offer services from coast to coast, Boston Bank senior counsel Robert Patrick Cooper says.
It's also the third-largest African-American privately owned bank in the country, after Chicago's Seaway Bank and Washington, D.C.'s Industrial Bank, he says.
The deal is a stock swap between the two privately held banks. Each share of Founders became 3.6 shares of Boston Bank common stock.
The new bank, Erskine says, has assets of $250 million, more than double what Founders was worth at the deal's signing in October.
Founders began as a savings and loan association in the 1980s and was rechartered as a national bank in 1991.
A local community bank serving South Central Los Angeles, its high-profile owners include former basketball great-turned-businessman Earvin "Magic" Johnson, singer Janet Jackson and Jheryl Busby, former Motown president and currently head of urban music at DreamWorks SKG.
Erskine, 50, says the most challenging part of the deal was that it had certain characteristics of a "merger of equals."
"It is not one institution buying another and cleaning out its assets but a melding of two institutions," Erskine, who has been with Manatt Phelps & Phillips for 15 years, says. "The combined company incorporated elements of both Founders and [Boston Bank] pre-merger."
Erskine, who has represented Founders since 1994, is very pleased with the deal. "It's a great transaction for the client," he says. "It's a very positive transaction for the banking industry, especially in the African-American community."
PAST DEALS: In 1999 and 2000, Erskine represented Bank Plus in the sale of branch offices and mortgage loans to several financial institutions, including Peoples Bank of California and First Federal Bank of California. The series of deals had a total value of $565 million.
QUOTE: "This deal represents a significant trend toward consolidation and the building of critical mass in the financial services industry serving the African-American community nationwide. This trend is happening in the Asian-American communities, as well. I think it is a beneficial trend and that it will continue, both through efforts by BBOC/Founders, who have an explicit nationwide "roll-up" strategy, and through the efforts of others in the industry."
Victoria Newman
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