Looks to me like SVRN is being used as chum. Bait, if you will, to attract an entity sufficiently large and hungry enough to swallow it.
At least that's what this article suggests to me:
The Boston Globe Downtown Column
Dec. 10 (The Boston Globe/KRTBN)--FAST FORWARD through the Microsoft
wars and imagine that the Justice Department manages to force Bill
Gates to divest an important part of his empire. You think the
government is going to allow him to sell the business for top dollar to
some weak-sister competitor?
Terry Murray is not Bill Gates, and no one has accused his FleetBoston
Financial Corp., for all its muscle, of the kind of anticompetitive
shenanigans that have been laid out in the landmark Microsoft case. But
forced to divest hundreds of branches to get his acquisition of
BankBoston past the regulators Murray managed to do just what Gates
would never get away with: Sell the business for top dollar to some
weak-sister competitor.
Sovereign Bancorp is scheduled to move into Fleet's grand 75 State St.
headquarters Monday. But it is hard to fathom how we got to here: The
much-ballyhooed biggest divestiture in American banking history yielded
exactly a single bidder at the finish line willing to pay Fleet's
price, one who then had to finance the deal with junk bonds.
This is the best the government could do to ensure a competitive
banking market?
You have to admire Murray's accomplishment. In the past decade he has
managed to swallow his three major competitors: Bank of New England,
Shawmut National, and BankBoston. BayBanks came as a bonus with
BankBoston. Let Murray actually buy the Red Sox and how long before he
is making a move on the Celtics, Pats, and Bruins? I can imagine his
favorite henchman, Mike Zucchini, back from his California horse ranch
again grinding out those costs, this time on Yawkey Way and Causeway
Street. Think people would say enough then?
The Sovereign deal has Murray's fingerprints all over it. Back in
March when Murray was asked whom he wanted to buy the 300 branches to
be divested, he had a ready answer: "Medford Savings Bank." Medford
Savings was just the kind of competitor he wanted -- if only it had the
bankroll to get the deal done.
In Sovereign Murray found the patsy he wanted.
"Fleet had an interest in finding a potential buyer that was
minimally acceptable to regulators, but also one that isn't a real
competitive threat to them," says John Carusone, president of the Bank
Analysis Center, a Hartford consulting firm. "Fleet looked out for its
shareholders. But from a public policy standpoint there are some real
issues."
Start with price. Fleet set a floor of getting a 12 percent premium on
the deposits it was selling, those familiar with the deal say. Some
potential bidders walked away then. Some prominent banks looked, but
weren't willing to meet Fleet's price. Only Sovereign was willing to
pay up for the entire package. "We expected more interest," says
Massachusetts Attorney General Thomas Reilly. "We played the cards we
were dealt. In was the best we could do under the circumstances."
Not only did Fleet get top dollar -- $1.4 billion for 278 branches
from Sovereign -- but it got a rival with no margin for error. While
Sovereign has a good record of integrating acquisitions, it is left
saddled with a huge load of debt, a junk bond rating and in need of
making aggressive projections if this deal is to fly.
Joseph Campanelli, a former Fleet executive now president of
Sovereign's New England operation, thinks I'm too gloomy. "The key on
the Sovereign side is execution," he says.
It is not like there is no competition on the ground; small bankers
will tell you they delight in competing against the big, impersonal
Fleet. But regulators would do well to figure out how we got to here:
One megabank, two midsized players in Citizens Financial and Sovereign,
and a slew of tiny community banks competing like mad. Fleet dodged the
bullet it most feared: opening a window to a Bank of America or First
Union. Murray couldn't have orchestrated it better himself -- or did
he?
Our best hope is that the game is not done yet. If regulators did
their best, maybe the very forces that got us here -- massive banking
consolidation -- can yet get us out. Could Sovereign or Citizens turn
out to be temporary place holders for a Bank of America? I'm betting
they are.
By Steve Bailey
-0-
To see more of The Boston Globe, or to subscribe to the newspaper, go
to boston.com
(c) 1999, The Boston Globe. Distributed by Knight Ridder/Tribune
Business News. MSFT, FBT, SVRN, BAC, FTU, END!A2?GL-DOWNTOWN-COL |
