Securities officials are investigating a sharp increase in the price of Rainier Bancorporation's stock in the days before the company's announcement that it would be acquired by Security Pacific.
Security Pacific, Los Angeles, announced on Feb. 24 that it would acquire Rainier, based in Seattle, in a stock swap valued at roughly $1.1 billion.
In the two trading days immediately before the announcement, Rainier's stock rose $8.50 a share to $47.25.
The Securities and Exchange Commission and the National Assn. of Securities Dealers have asked the two banking companies and a law firm involved in the merger talks to provide names and addresses of people who had prior knowledge of the buyout offer.
The federal agency and the securities trade group, which operates the national over-the-counter stock market, are looking for evidence of possible insider trading, the illegal practice of using information not available to the public to profit from stock transactions.
Law Firm Cooperating
Spokesmen for Security Pacific and Rainier said the banks had received "routine" requests for information from the National Assn. of Securities Dealers, including the names of executives who worked on the deal.
Edward Lange, a partner in the Seattle law firm of Davis Wright & Jones, said his firm had agreed to give the names and addresses of all its lawyers and employees to the SEC.
Lange said he had sent a memo on Feb. 19 to 11 other partners in his firm, informing them of Security Pacific's request for the firm to assist in the potential acquisition and asking whether they had any conflicts of interest. The memo did not provide specific information or state that an acquisition had been made, he said.
On Feb. 20, Rainier stock jumped $3.25 per share to $42 in national over-the-counter trading on what a number of analysts said was takeover speculation.
In the next session, Feb. 23, Rainier stock jumped $5.25 to $47.25 in heavy trading. On that day, Rainier disclosed that it had received separate merger offers from two unidentified suitors, one of which was Security Pacific.
Lange said he was "quite confident" that no one in his firm had engaged in insider trading or had given improper information to people outside the company.
Calls It Routine
Lange said he understood that the investigation was routine, stemming from the stock surge before the disclosure of the two merger offers.
Jack Bookey, SEC regional administrator in Seattle, would neither confirm nor deny that an investigation is under way.