3246098

Analyst: Chemical Deal Valuation Lousy

3246098

Chemical Financial's proposed merger with Talmer Bancorp is being roundly criticized by a New York portfolio manager as a "lousy" valuation, and a "distressed price" that should be turned down by shareholders. Richard Glass of Deutsche Bank in New York City, whose portfolio includes Talmer Bancorp shares, blasted Talmer bankers in the investor conference call to explain the deal yesterday.

Glass is quoted in the transcript as saying, "As Talmer shareholders, we are incredibly disappointed. If this is a merger of equals, you guys can call it whatever you want, but if this is the merger of equal, one part is clearly more equal than the other. You guys are selling for a distressed price or what looks to get distressed price at below 1.5 time's tangible book value after reporting good earnings."

Glass later told Talmer officials, "The fact that you guys did not take this our for a process, besides the fact the banker should be ashamed themselves, really leads me to think that the board and management are not upholding their fiduciary duty. Your fiduciary duty is to the existing shareholders, not to the future company and combined entity." Glass fells that Talmer officials should have shopped around for a better offer. He adds, "So from our perspective, the valuation is not great at all. I'd say it's lousy!"

Talmer President & CEO David Provost responded by saying, "We respectfully disagree with your points completely. This is a great deal for our shareholders. We spent a lot of time scrutinizing with our board, looking at our very strategic alternatives and this is a great deal for our shareholders." He went on to point out that the transaction "is not a sale of Talmer, it is a merger of equals."

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Steve Alexopoulos from JP Morgan also seemed to be caught off guard by the deal announcement. He questioned the deal even before Glass, saying, "Most of us are quite surprised over the price you're selling the bank. It seems like a great deal for Chemical. Their stock's up over 2-percent now, your's is down 4-percent. Did you shop the company and look for sale opportunities that would have offered a better deal for your shareholders?" He later added, "In my mind it's a no-premium transaction."

Provost responded with, "No. We view this as a fantastic deal for our shareholders. We're looking at combining with a great company, we don't look at it as a sale. We look at it as a merger of equals, so we're taking the best of both companies, we get a lot of cost savings, we get this over the $10-billion mark, so it wasn't a shop situation, we view this as a great transaction."

The deal, valued at approximately $1.1-billion will great one of the largest community banks in the entire Midwest, but still faces regulatory approval and a vote of shareholders of both financial institutions.

Here's a link to the original story of the deal from yesterday:

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