No big deal: the Indecorp-OmniBanc dream merger collapsed. What went wrong? – OmniBanc Corp.; Indecorp Inc
It looked like a done deal. OmniBanc Corp., a small bank holding company in suburban Detroit, had agreed to purchase Chicago-based Indecorp Inc., owner of two major black-owned banks. The acquisition would have created America’s largest black-owned bank holding company (see “Building A Financial Powerhouse,” June 1994).
But late last year, the deal collapsed, due to rising interest rates and lousy timing. OmniBanc Chairman Bill Johnson still hopes a new agreement can be worked out, but he admits that ‘the deal that was proposed is dead.”
Johnson, an attorney and former owner of a cable television system in Columbus, Ohio, purchased the money-losing River Rouge Savings Bank in 1989. He renamed it OmniBank, (the holding company is OmniBanc), invested $3 million in new capital, and restored the bank to profitability by 1993.
Then Johnson learned that Indecorp was for sale. Founded in 1964, Indecorp boasted two of the nation’s leading black banks. Drexel National Bank and Independence Bank of Chicago together hold $269 million in assets.
By contrast, OmniBanc has only about $23 million in assets. But with the help of investors like former Detroit Pistons star Isiah Thomas, Johnson was able to put together a $30 million proposal to purchase Indecorp.
His cause was helped by community activists who wanted Indecorp to remain a black-owned institution. In addition, Johnson won the support of Illinois State Treasurer Patrick Quinn by pledging to make $120 million in loans to low-income Chicagoans.
Originally, Indecorp was reportedly trying to sell its banks to Shorebank Corp., the Chicago bank-holding company that owns the renowned South Shore Bank. But some people objected to the prospect of Indecorp being sold to white owners. Shore Bank officials also reportedly strayed away from a deal because they wanted to continue to focus on community banking, while Indecorp had ventured into other areas, including foreign currency exchange, trust services and the underwriting of municipal bonds.
Johnson and Indecorp President Alvin Boutte struck a bargain in September 1993. The only thing standing in the way was Federal Reserve Board approval.
That approval was a year in coming. Meanwhile, the Fed was busy raising interest rates to stave off a possible rise in inflation.
Unfortunately, about two-thirds of Indecorp’s assets are in the form of bonds, and increases in interest rates tend to depress bond values. So the Fed’s war on inflation ravaged Indecorp’s asset base.
Johnson had his financial advisors take another look at Indecorp’s books. “The memo that came in from our people was, you don’t want this deal, certainly not at $35 million,” Johnson recalls.
So OmniBanc offered a revised deal, lowering the price to $26 million. But Boutte would not cut his price. “There’s not enough fat in this to cut out,” he told the Detroit Free Press. Johnson saw the situation differently, declaring that “Indecorp was in denial.”
The Fed approval expired on Dec. 15, and so did the proposed Indecorp-OmniBanc merger. For now, Johnson says he will focus on opening OmniBanc branches in the Detroit area. Perhaps expansion in Detroit will bring him the success that eluded him in the Windy City.
COPYRIGHT 1995 Earl G. Graves Publishing Co., Inc.
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