By Fraust, Bart
American Banker , Vol. 151
Chemical Says Horizon Won't Get Off Hook
Expects to Complete Deal in '89 When Jersey Law Will Permit It
Chemical New York Corp. management says it is not about to lose its latest interstate catch, although it will be at least three years before Chemical can reel it in.
Chemical last week agreed to acquire Horizon Bancorp in Morristown, N.J., in a cash deal to be valued at 2.5 times Horizon's book value when the deal is completed. The acquisition marks the first full merger agreement ever between New York and New Jersey bank holding companies.
Horizon's shares, which are traded on the New York Stock Exchange, continued to soar on Friday, as they did all last week. At midday, Horizon shares were trading at $52.13, up $2.13 from the close on Thursday. Chemical shares were selling for $52.50, down 25 cents from the previous day's close.
As the New York banking company cannot complete the deal until at least 1989 under New Jersey's interstate banking law, analysts questioned whether Chemical will be able to keep Horizon in the fold for that length of time, particularly if New Jersey banks start selling out for even higher premiums than entailed in the Chemical-Horizon merger.
Remaining in the minds of some analysts is Chemical's failed attempt last year to enter Ohio through the acquisition of the insolvent Home State Savings Bank in Cincinnati. After two months of negotiations with the State of Ohio, Chemical was outbid at the 11th hour by Cincinnati financier Carl Lindner.
Will Chemical Be Burned Again?
Some observers expressed concern that Chemical would get burned again with Horizon.
"As in Home State, Chemical again is playing the gentleman's game,' said New York banking consulting John Lyons. "They have a tendency to live by the rules rather than change them.
"They don't have the same blood instinct as Citicorp,' he added. "If a state law is in the way, they try and change the law.'
Mr. Lyons, a principal with Lyons, Zomback & Ostrowski Inc., represented the State of Ohio in its negotiations with Chemical last year in connection with the sale of Home State.
Chemical, the nation's sixth largest bank holding company, has seen its interstate plans derailed on other occasions. Most recently, it was outbid for the failed Park Bank of Florida in St. Petersburg by the rival Chase Manhattan Corp.
In addition, Florida law has prohibited Chemical from completing its 1981 agreement to acquire Florida National Banks of Florida Inc., Jacksonville, if and when federal and state laws permit.
Although Florida National for months has been the subject of takeover rumors, the agreement with Chemical has been a major deterrent to rival bidders. Chemical owns a sizable portion of Florida National's nonvoting stock, and a rival would have to buy out Chemical, making a potentially expensive deal that much more expensive.
Chemical management believes it has the firepower to protect the Horizon deal too.
Kenneth N. LaVine Jr., executive vice president for finance at Chemical, said the price-book multiple and the warrants to buy Horizon common stock will deter rival bids for the Morristown banking company. …