Magazine article American Banker

Texas' Thriving Sterling under Pressure to Sell

Magazine article American Banker

Texas' Thriving Sterling under Pressure to Sell

Article excerpt

After 12 straight years of record earnings, Sterling Bancshares Inc. in Houston ranks as one of the fastest-growing bank companies in the Southwest. In fact, the $1.9 billion-asset company is so bullish on its growth prospects that it recently announced plans to open a new bank in Dallas. Yet several shareholders, frustrated by Sterling's sluggish stock performance, are stepping up their efforts to persuade it to sell. In a letter late last month to chairman George Martinez, shareholder Howard Wolf, a securities attorney in Austin, Tex., said fellow shareholders are asking him to solicit proposals from would-be acquirers. He urged Sterling's board to get a deal done before yearend, when federal regulators are expected to eliminate the pooling-of-interest accounting method that most banks favor in merger deals. "I believe it would be possible to quickly assemble 10 to 20 people in Houston that either own or have direct relationships with owners of a large aggregate amount of stock of Sterling who would support a transaction ... before the pooling-of-interest rules change," Mr. Wolf wrote in the letter, which was filed with the Securities and Exchange Commission. Another shareholder, stockbroker John Linnartz, also said the company should consider sale. Sterling stock was trading two years ago at $18, Mr. Linnartz said in an interview, but by two months ago it was down to $8.50. The bank could be sold "tomorrow" for more than $20 a share, which is about 20 times the current year's expected earnings, he said. But if it remains independent, he said, the stock might take three years to reach $20, according to bank analysts. "Given that the market is not properly valuing our company, why should the investors want to wait three years for the stock in the open market to reach $20 if we could get the same price today in a risk-free transaction? …

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