Encore's Impressive Premium Gives Sellers Leverage in Texas

By Witkowski, Rachel | American Banker, March 8, 2012 | Go to article overview

Encore's Impressive Premium Gives Sellers Leverage in Texas


Witkowski, Rachel, American Banker


Byline: Rachel Witkowski

Last month, James D'Agostino at Encore Bancshares Inc. was prepared to execute on a three-year growth strategy that management had already mapped out and the board had approved.

Those plans were shelved once Encore received a call from Cadence Bancorp LLC, a competitor that had other plans, approaching the Houston company with a $250 million buyout offer.

Cadence's offer was "essentially equal to the future value that we would produce" with the recently adopted long-term plan, says D'Agostino, Encore's chairman and chief executive. Instead of waiting three years, "we'd able to provide our shareholders that value today."

The deal surprised many industry observers, including D'Agostino, who just last month told American Banker that Encore's growth in Houston would support its independence. Until now, most large, attractive banks in Texas have shrugged off the notion of selling given a price gap between their expectations and those of potential buyers.

The premium Cadence is paying Encore a 2.4 times tangible book value a is the highest among deals announced in Texas in the past two years, though far less than those that took place before the financial crisis, according to data from FBR Capital Markets and SNL Financial. Industry observers said rising premiums should give coveted sellers an upper hand in negotiations.

"We've already had a couple of Houston bankers call us saying this is the best thing that could happen to them" as sellers, says Dan Bass, a managing partner at FBR.

Buyers may not be as ecstatic. "There are a lot of banks we talk to on a frequent basis who are trying to get big in Houston and I'm sure they're very upset," Bass says. "The next person that tries to buy a bank in Houston a[bar]they're going to have to pay up."

Cadence's premium surpassed Comerica Inc.'s agreement to pay 2.3 times tangible book value in January 2010 for Sterling Bancshares Inc. in Houston, according to data from FBR.

Paul Murphy Jr., Cadence's chief executive, had been watching Encore since his investment group raised $1 billion roughly 18 months ago. Murphy says he knew Cadence had to get Encore's attention.

"We knew they were not for sale," Murphy says. "We had to claw our way in."

Last month, Cadence made an unsolicited offer for Encore. D'Agostino says he took the offer to his board and, after comparing it to Encore's growth strategy, determined that shareholders would get the same return, only sooner. Selling also removes unknown macroeconomic risks that D'Agostino calls "black swans" that fly in and weaken internal growth plans.

"As I expressed previously, we were very excited about remaining independent," D'Agostino says. Cadence's offer, at $20.62 a share in cash, "fully recognizes the value created by the plan" without "the unknowns that are out there in the economic environment."

"We think [the price is] an attractive value for the bank but we certainly don't think we stole the bank by any means," says Murphy, who has been a Houston banker for more than 30 years. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Encore's Impressive Premium Gives Sellers Leverage in Texas
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.