Herbert M. Katzenberg, a Mercantile Bankshares shareholder and trustee emeritus of the Baltimore Community Foundation, knew before he stepped up to the microphone yesterday that he had little chance of stopping the bank's sale to Pittsburgh-based PNC Financial Services Group.
It might be good for shareholders, he conceded to those attending Mercantile's special meeting to consider the $6 billion deal. But he countered that it won't be good for Baltimore, which over the years has relied on Mercantile's local executives for help in everything from the redevelopment of the Inner Harbor to financial support for the Baltimore Symphony Orchestra.
"For the good of Baltimore City, vote against the merger," he said, eliciting scattered applause from the roughly 100 shareholders and bank employees assembled at the Radisson Plaza Lord Baltimore Hotel.
Minutes later, sentimentality gave way to financial reality when Mercantile executives revealed that nearly 96 percent of the bank's shares were voted for the merger, which will pay shareholders 28 percent above the stock price when the sale was announced.
Katzenberg's speech included, the meeting took less than 30 minutes, putting Mercantile another step closer to joining the ranks of Baltimore-based banks sold to out-of-state buyers as part of a decades-long consolidation trend. Mercantile was one of the last holdouts, steadfastly maintaining its legacy dating back to the Civil War as caretaker of Baltimore's blue-blood money.
"Obviously, Mercantile has had a very rich history," said Edward J. Kelly III, Mercantile's chairman and chief executive. "It's not an easy decision, as I've said before. But on balance we felt it was the right one; principally for the stockholders, but also for the other constituents involved."
Other than Katzenberg, only a few shareholders disagreed with Kelly yesterday. The reasons given had mostly to do with concerns that shareholders will incur capital gains taxes because part of the purchase price is in cash. Shareholders are poised to get 0.4184 shares of PNC stock and $16.45 in cash for every Mercantile share they own. The cash portion represents about a third of the value to shareholders.
"At the end of the day, the premium even on the after-tax basis - given that cash is only a third - is still very, very substantial," Kelly said in an interview after the meeting.
