VantageSouth Bank’s plan to double in size by acquiring East Carolina Bank is running into resistance from some shareholders of the Hyde County-based financial institution who object to the terms of the deal.
ECB Bancorp’s largest shareholders – the Gibbs family, consisting of three siblings whose grandfather co-founded what was originally Engelhard Banking and Trust Co. in 1920 – are among those who oppose the deal proposed by Raleigh-based VantageSouth in September. VantageSouth changed its name from Crescent State Bank in December.
The Gibbs siblings, Gregory, Regina and Charles Jr., collectively own a smidgen more than 12 percent of ECB’s outstanding shares, according to documents filed with the Securities and Exchange Commission.
Gregory Gibbs, a former ECB director who was on the board for nearly 18 years, said he and his brother and sister agree that VantageSouth’s all-stock proposal, which was valued at $51.6 million when it was unveiled, undervalues the company.
“The real estate is worth that,” he said. “The shareholders are losers in this deal.”
ECB has 25 branches scattered across the eastern half of the state and owns all but a few of the buildings and land, Gibbs said.
Executives at East Carolina Bank and Vantage South declined to respond to criticism of the deal, pointing instead to voluminous documents filed with the Securities and Exchange Commission that outline the terms and how they were reached.
“We feel the public disclosures ... should stand on their own,” said Thomas Crowder, chief financial officer at East Carolina Bank.
Those disclosures note that Sandler O’Neill & Partners, the investment bank hired by ECB to analyze VantageSouth’s offer, concluded that it was a fair price for ECB shareholders.
Shareholders of Crescent Financial Bancshares, the corporate parent of Vantage South, already have approved the deal.
But Gibbs said sentiment against the deal among ECB shareholders is strong enough to introduce some suspense into the vote to consider the deal scheduled for March 20 at the Washington Civic Center in Washington, N.C.
“I think it will be close,” he said.
Another shareholder who opposes the deal, Walter Baum, agreed there is substantial opposition.
“I have not run into one person who is in favor of this,” he said.
The deal proposed by VantageSouth calls for ECB shareholders to receive 3.55 shares of Crescent Financial for each share of ECB they own. When the deal was announced the two banks said that, based on Crescent’s average share price of $5 over the past five years, that amounted to $17.75 per share – a premium of about 50 percent over the closing price the day before the deal was unveiled.
On Wednesday, Crescent Financial shares closed at $4.28, down 4 cents. Since the deal was announced, Crescent Financial shares have traded as high as $5.25 and as low as $4.01.
Gibbs said he doesn’t like that the VantageSouth offer doesn’t include any cash.
Gibbs believes that ECB could do just fine as a stand-alone bank but, if the directors and executives wanted to sell, “they needed to go around and shop for the best deal. But they didn’t do that. They just took the first bone that was thrown to them.”
VantageSouth CEO Scott Custer initiated discussions with ECB CEO Dwight Utz last May. At the time the ECB board was weighing its options in the wake of the collapse of its planned acquisition of seven Gateway Bank branches, a deal that was scuttled when plans to raise $80 million in a private stock offering fell through.