Newspaper article The Florida Times Union

Florida Banks Deal Is Good, but It Was Once Better

Newspaper article The Florida Times Union

Florida Banks Deal Is Good, but It Was Once Better

Article excerpt

Byline: Mark Basch, The Times-Union

By most accounts, Florida Banks Inc. shareholders got a pretty good deal last week when The South Financial Group agreed to buy the Jacksonville-based banking company for $22.84 a share, a 19 percent premium over its previous stock price. But long-time stockholders may recall a time when they could have received double that amount for their Florida Banks shares, if they acted quickly.

During a one-week period in April 1999, Florida Banks became a symbol of the stock market's late 1990s lunacy. The stock went from $8.44 on Monday to $43 on Wednesday and back to $13 by Friday.

What happened? Well, Florida Banks announced that week that it would begin to offer Internet banking, an idea that was fairly new to the banking industry at that time. And since that was an era in which the word "Internet" sent traders into a frenzy, Florida Banks' stock suddenly rocketed higher, briefly hitting $43, before reality set in and the stock tumbled back down to normal levels.

Long-term shareholders probably weren't quick enough to take advantage of that ridiculously high price in 1999. But the company, which started in 1997, has quietly built up a profitable business and stockholders have been rewarded with a steady price climb over the last two years, culminating in South Financial's offer.

In fact, some analysts are concerned that South Financial is paying too much to build up its Florida business. The Florida Banks deal follows the South Carolina-based company's agreement two months ago to buy another Jacksonville-based bank, CNB Florida Bancshares Inc. South Financial's agreement to buy CNB, valued at $24.11 per CNB share at the time of the agreement, also represented a 19 percent premium for CNB shareholders.

"While the [Florida Banks] deal makes strategic sense and fits well with the recent CNB Florida acquisition in this attractive, faster growth Florida market, we believe that TSFG continues to pay a very full price to continue its central Florida build-out," said a report by Fox-Pitt Kelton analyst Todd Hagerman.

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