Executives Tout Benefits of Arvest-Superior Deal

by Gwen Moritz  on Friday, May. 16, 2003 12:00 am  

Arvest Bank Group's announced acquisition of Superior Financial Corp. will result in an Arkansas-based chain of community banks that looks very much like First Commercial Corp. before its 1998 sale to Regions Bank of Birmingham, Ala., Arvest Bank president Kevin Sabin said Friday morning.

But the $211 million purchase of Superior by Arvest should not result in the kind of customer runoff that followed the sale of First Commercial, predicted C. Stanley Bailey, CEO of Little Rock-based Superior.

"I don't see why there should be," Bailey said.

Arvest and Superior, he said, operate "mirror image" banks with similar cultures, identical computer systems and little geographic overlap, and their merger will have "minimal impact" on employees while giving retail customers more locations to choose from and increasing lending limits for commercial customers.

Combined, Fayetteville-chartered Arvest Bank and Fort Smith-chartered Superior Bank represent assets of $6.65 billion, $5.55 billion in deposits and 190 branch banks stretching from Little Rock to northwest Arkansas, Tulsa and Oklahoma City. (By comparison, First Commercial had about $7.7 billion in assets when it was acquired by Regions.)

Of those 190 branches, only about six overlap so closely that one will need to be closed, Bailey and Sabin said, specifically naming offices in the Chenal area of west Little Rock, Springdale and Siloam Springs.

With four to six months until the deal closes and industry average employee turnover rate of 30 percent, Bailey and Sabin predicted that very few bankers would lose their jobs because of the merger.

"The biggest impact will be in our back office in Fort Smith," Bailey said, which employs 75-100 workers. That number, however, includes employees of Superior's call center, which will remain intact because Arvest is not staffed to handle the extra 500,000 calls a month that Superior's call center handles.

Bailey said his "long and respectful relationship" with Arvest CEO Jim Walton had led to the merger discussions that began several weeks ago. On Friday, Superior announced that its board of directors had approved the sale of the publicly traded company to Arvest Holdings Inc., a subsidiary of privately held Arvest Bank Group, for $23.75 a share.

The offer represented 1.48 times book value and a 24.5 percent premium over Superior's closing price of $19.07 on Thursday. Superior's stock price immediately jumped by $4.50.

"The market is making the judgment that this is a pretty certain deal," said James Schutz, senior bank analyst in the Chicago office of Stephens Inc. of Little Rock. "The latest trade is $23.57, less than 20 cents off the takeout price."

Those buyers will also benefit from one or two regular dividends, depending on how long it takes for federal and state regulators to approve the deal.

Stephens Inc. acted as Superior's financial advisor in the deal.

For shareholders who bought into Superior when it made its initial public offering in February 1999, the return on investment is pretty good, Bailey said.

"We took the company public at $10 a share. Essentially four years later, [those shareholders] will cash out at $23.75 plus one or two dividends. As a major shareholder, I think its been a very favorable ride for shareholders," he said.

Bailey owned or controlled 617,748 shares — 7.03 percent of the outstanding stock — as of March 31, according to the proxy statement Superior issued on April 17. At $23.75 a share, his holdings are worth about $14.7 million.

Arvest's purchase signals the disappearance of another Arkansas public company.

Arvest has been the largest bank in Arkansas by every measure since 2002, when it combined 14 charters in three states into the former McIlroy Bank & Trust charter in Fayetteville, the oldest charter in Arkansas. Superior Bank, a 69-year-old thrift, will be part of the Arvest Bank charter.

As of March 31, Arvest had assets of $4.9 billion and deposits of $4.3 billion. Superior reported assets of $1.75 billion and deposits of $1.25 billion.

Arvest is controlled by Walton, one of Wal-Mart founder Sam Walton's four children. The bank holding company has branches in Arkansas, Oklahoma and southern Missouri.

Arvest established a presence in Little Rock through its purchase of Central Bank & Trust of Little Rock in 2001.



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