The state's largest financial institution and parent of Bank of Hawaii said it has signed a definitive agreement to purchase Encino-based California United Bank, which operates 21 branches throughout the Los Angeles and Orange County areas.
The deal is expected to close by the end of the third quarter and is subject to regulatory and shareholder approval.
Lawrence Johnson, Bancorp's chairman and chief executive officer, said the transaction is part of the company's long-term strategy to remain independent and expand its business in the Asia-Pacific region.
Johnson and Tom Leppert, a Bancorp vice chairman, said the deal could be the first of several acquisitions. "We're looking at this as a platform to expand further in California," Johnson said.
The company said it will pay a combination of stock and cash and will merge California United's holding company CU Bancorp into Bancorp Hawaii. The California company will be known as Pacific Century Bank.
Stephen Carpenter, CU's chief executive officer, said he didn't expect any personnel changes at the company, which has about 380 workers. Carpenter will remain as CEO of Pacific Century Bank.
Tom McCandless, senior banking analyst at NatWest Securities, said the deal will give Bancorp Hawaii an important foothold in the Southern California market, which is growing at a faster rate than Hawaii's sluggish economy.
McCandless said the purchase price of $183 million, which translates into about $15.34 per share, is in line with what similar-sized California banks have sold for last year. He said the purchase price is about 21 times CU Bancorp's 1996 earnings. Similar-sized California banks sold for an average of 20 times their 1996 earnings last year, he said.
On Wall Street today, Bancorp Hawaii's stock rose 50 cents to close at $45.50 on the New York Stock Exchange, while CU Bancorp shares rose $1.121/2 to close at $14.371/2 on the Nasdaq market.
McCandless said California United is a well-managed company that is expanding its Asia-Pacific lending activities. It has listed assets of about $844 million.
Bancorp Hawaii's acquisition comes as competitor First Hawaiian Inc. has expanded from its traditional Hawaii base to the Pacific Northwest. First Hawaiian last year bought 32 former U.S. Bancorp branches in Oregon, Washington and Idaho for about $38 million.
Bancorp Hawaii, which plans to change its name to Pacific Century Financial Corp., said in November that it was looking to buy a West Coast bank when it hired Leppert as vice chairman of the company's mainland markets.
The company operates branches in Arizona as well as in Hong Kong, Seoul, Singapore, Taipei, Guam and American Samoa.
While the company is looking to the mainland for its expansion, Johnson stressed that Hawaii remains as Bancorp's core business.