By Jackson, Ben
American Banker , Vol. 166, No. 184
Signal Financial Corp.--Mergers, acquisitions and divestments
Banking industry--Mergers, acquisitions and divestments
Commercial finance companies--Mergers, acquisitions and divestments
Consumer finance companies
Signal Financial Corp. of Mendota Heights, Minn., wasn't looking for a buyer -- until Associated Banc-Corp of Green Bay, Wis., made an offer it could not refuse.
Just two years ago Signal Bank in Mendota Heights teamed up with two other community banks in the state to create $1.1 billion-asset Signal Financial.
But after the stock market closed on Sept. 10, $13.2 billion-asset Associated announced that it was buying Signal for $176 million. Associated would pay 30% in cash, at $276.83 per share, and the balance in an exchange of 7.5 Associated shares for each share of Signal.
Associated's stock closed at $31.95 the day the deal was announced. It was trading at $29.80 late Friday.
"We were very happy and content" with the deal, said Galen T. Pate, Signal's chairman. "These people came in and did offer us a very good deal."
The acquisition of the privately held Signal would be the first in three years for Associated, which itself had been under pressure from some shareholders to sell. It would more than double Associated's assets in Minnesota, to $1.8 billion, and would nearly double its number of branches there, to 17, including eight in the Twin Cities region.
"Their locations are good and complementary to our locations in Minneapolis," said Robert C. Gallagher, the president and chief executive officer of Associated. "We believe we can grow internally, but we need vibrant markets to continue growth."
But location was not the only reason Associated decided to court Signal. Both companies are large Small Business Administration lenders, but they specialize in different types of loans. Signal's SBA program focuses on commercial real estate loans, while Associated's concentrates on operating loans.
Historically a commercial banking company, Associated became heavily concentrated in mortgage lending after its 1997 acquisition of $6 billion-asset First Financial Corp. of Stevens Pont, Wis. Since then it has been working to rebalance its portfolio, and buying Signal and integrating its small-business lending would help implement that strategy.
While the markets didn't have much opportunity to approve or disapprove -- the deal was announced the day before the attacks on Washington and New York -- observers had mixed reactions to the deal.
Christopher R. Raffo, an Arlington Heights, Ill., institutional salesman for the San Francisco-based Hoefer & Arnett, said the deal would be bad for Associated. Mr. Raffo has been a constant critic of Associated, which he says has not incorporated its acquisitions well and has failed to meet its earnings growth targets of 11% per year. …