After six months of rejection, First Maryland Bancorp has dropped its $17-a-share takeover offer for Baltimore Bancorp, putting an official end to one of the most rancorous battles ever waged in the local banking community.
First Maryland, though not directly blaming a deteriorating real estate market or its rival's slumping stock price, said the decision came because of "changes that have arisen in the marketplace" since its initial offer was made April 27.
Given those changes, "we believe that our cash offer of $17 per share is no longer appropriate," Jeremiah E. Casey, chairman of First Maryland, said in a prepared statement.
He said, however, his company remained willing to discuss a possible merger with its smaller rival if Baltimore Bancorp changed its mind.
Analysts attributed First Maryland's reversal to the slumping commercial real estate market that has the banking industry in a virtual tailspin.
"It's just a realization that it's a very different market than when they first made their original bid," said David S. Penn, a banking analyst at Legg Mason Inc. in Baltimore. "Things have changed dramatically. Why in the world would they want to make an acquisition here when you don't know about the real estate market and how bad it's going to get?"
Despite recent figures from Baltimore Bancorp that show it has an unusually low level of bad loans in today's marketplace, some analysts worry that problems at the bank could mount. A recent report from Alex. Brown Inc. placed Baltimore Bancorp among its list of banks that it believes are most likely to encounter problems in the future.
Baltimore Bancorp, which had been trading at $10.25 a share before the initial offer and at $15 immediately after, closed yesterday at a 52-week low of $5.125 a share, down 62.5 cents for the day. First Maryland, which is owned by Allied Irish Banks PLC in Dublin, does not trade on the public markets.
Yesterday's announcement came as a rather quiet and anticlimactic end to what had spawned an unusually heated series of exchanges between the two Baltimore banking companies in late spring.
First Maryland, which owns the First National Bank of Maryland, had insisted the offer was made in a "spirit of cordiality and goodwill." Baltimore Bancorp, the parent of the Bank of Baltimore, harshly rejected that claim, countering that it was designed to create a hostile atmosphere and promised that the bank "would not be cowed by these tactics."
Marked by shareholder lawsuits, a steamy stockholders meeting May 16 and a bitter war of words between the two sides, the ensuing $217-million takeover battle would later serve to also pit Baltimore Bancorp against its largest shareholder, the hometown investment firm T. Rowe Price Associates.
"While we are disappointed by First National's decision to withdraw its proposal, it does not come as a total surprise," T. Rowe Price said yesterday. "We hope the [Baltimore Bancorp] board of directors is sensitive to the frustrations of its shareholders given the recent decline in the bank's stock price and concerns over a deteriorating banking environment."
Although First Maryland had insisted its lingering offer to negotiate a purchase remained on the table, it increasingly stressed that any offer was contingent upon a thorough review of Baltimore Bancorp's books.
For its part, Baltimore Bancorp, which had made no comment on the offer since its second and final rejection May 31, released a statement yesterday.
"Actually, we never received a formal offer from First Maryland but a proposal to discuss an offer subject to due diligence," Baltimore Bancorp President and Chief Operating Officer John C. Haigh said in a prepared statement.