Hanmi Bank pursues larger rival
It wants to combine with BBCN to prevent its merger with fellow Koreatown lender.
One of the country’s biggest Korean American banks wants to pair off with a larger rival in a deal that would create an ethnic banking behemoth in Koreatown.
Hanmi Financial Corp., parent of Hanmi Bank, disclosed Monday that it wants to combine with BBCN Bancorp in a $1.6-billion deal aimed at blocking BBCN from merging with another rival bank.
The offer, made in a letter to BBCN’s board late last week, came after Hanmi executives heard that BBCN, the nation’s biggest Korean American bank, was close to a deal with Wilshire Bancorp, the nation’s No. 2.
Hanmi, which ranks third, called for an all-stock deal that would value the merged BBCN-Hanmi at roughly $2.4 billion.
The three banks are headquartered within blocks of one another in Koreatown and specialize in lending to businesses owned by Korean immigrants in Los Angeles and other cities and states.
In Southern California, the combination would probably mean the closure of dozens of Hanmi or BBCN bank branches. Hanmi estimates it has 21 branches within a mile of a BBCN branch, and that branch closures and other measures could cut costs for the combined bank by as much as $60 million a year.
In a letter sent to BBCN’s board Friday, Hanmi Chairman Joseph K. Rho said he was “dismayed” to read in a Korean-language newspaper that BBCN was in advanced merger discussions with Wilshire Bancorp and was disappointed that Hanmi had not had the opportunity to discuss a merger.
C.G. Kum, Hanmi’s chief executive, told The Times that Hanmi had been approached this summer by members of BBCN’s board who were interested in combining the two banks — and in having Kum and other Hanmi executives run the merged company.
But Kum said BBCN’s board as a whole has rebuffed his attempts to discuss a deal and that Kevin Kim, BBCN’s chairman and chief executive, was against the idea.
“There’s a segment of BBCN’s board that believes Hanmi and its management team is better suited to run a combined organization — obviously the group that was interested in exploring a combination with us was not in the majority,” he said.
Hanmi went public with its offer because Kum believes that all BBCN shareholders should be aware of Hanmi’s interest in a deal.
“We were concerned BBCN shareholders and all board members were not given all of the facts,” he said.
A BBCN spokeswoman said in an email that the bank’s board and management were reviewing Hanmi’s proposal and could not yet comment.
A Wilshire bank executive also declined to comment.
Tim Coffey, an analyst at banking industry brokerage FIG Partners, said a BBCN merger with Hanmi makes sense because it will give the merged entity economies of scale. But he added that after years of rivalry, some at BBCN might hold a grudge against Hanmi for hiring away bankers and executives in the past.
“There are a lot of highlevel BBCN people working at Hanmi now,” Coffey said.
Hanmi disclosed its offer publicly after markets closed Monday.
The deal proposed by Hanmi would be an all-stock transaction that would ultimately give BBCN shareholders a 65% stake in a combined entity. BBCN shareholders would exchange each of their shares for about three-quarters of a share of Hanmi’s more highly valued stock.
Based on Hanmi’s closing price Monday, BBCN stockholders would receive a fraction of a share worth $19.81 — an 8.5% premium over the value of their current shares.
Hanmi shares closed Monday at $27.02, down 23 cents, or less than 1%. BBCN shares rose half a percent, or 9 cents, to close at $18.25.
A combined BBCN and Hanmi would have locations in 10 states — though most are where both banks already do business — and about $12 billion in assets. That would make it by far the largest Korean American bank, more than twice as large as Wilshire Bancorp., which would remain in the No. 2 spot.
It would be one of just six L.A. banks with more than $10 billion in assets.
A merger between BBCN and Wilshire would create an even larger lender, one that would dwarf Hanmi.
Kum said fear of a potential BBCN-Wilshire combination is not part of the motivation for its merger proposal.
But Coffey said if BBCN combines with either Wilshire or Hanmi, whichever bank is left out of the deal will be at a big disadvantage.
There’s been talk for years of a merger among two of the three big Koreatown banks. A few years ago, Wilshire and Hanmi contemplated a deal of their own — one that fell apart at the last minute, Coffey said.
“It got to the point where Wilshire had reserved a meeting space at a hotel room for a press conference,” he said. “That’s how close they were.”
Since then, all three big banks have focused more on expanding outside California, buying smaller Korean American banks in other markets.
Hanmi last year bought United Central Bank, a Garland, Texas, lender that also had operations in Illinois, Virginia, New York and New Jersey. BBCN has acquired banks in Chicago and Seattle over the last few years, while Wilshire bought a New Jersey bank in 2013.
Koreatown’s banks have looked to expand outside Los Angeles in part because the market is so saturated. Six of the nation’s seven largest Korean American banks are based in L.A., leading to fierce competition for customers.
The banks have also sought to grow by combining with or swallowing up local competitors. BBCN itself was created by the 2011 merger of former rivals Nara Bancorp and Center Financial. And in 2013, Wilshire Bank acquired Koreatown’s Saehan Bank.
Each of the banks, or their predecessor institutions, was founded in the 1980s.