Richard Pratt, the Australian industrialist who once planned on turning his holdings in two Orange County banks into a $1-billion banking chain along the Southern California coast, has instead put the banks up for sale.
Six to 10 institutions, including Wells Fargo Bank, are negotiating for the acquisition of Citizens Bank of Costa Mesa and El Camino Bank in Anaheim, two of the larger and well-operated banks in the county.
"We are carrying on detailed discussions with a short list of buyers," said Eugene Schutt, president of the banks' holding company, Citizens Holdings in Anaheim.
"But we don't expect that we will be reaching a final agreement with any party for a number of weeks, and we don't expect a transaction to be closed before December."
Schutt would not identify the prospective buyers, but other sources at the banks confirmed that Wells Fargo and the New York leveraged buyout firm of Kohlberg Kravis Roberts & Co. are among the interested parties.
A spokeswoman for Wells Fargo declined to comment on possible acquisitions, while officials at KKR could not be reached for comment.
The possibility of a sale of the holding company has upset top managers at the banks, who fear they would be laid off if the banks were sold to a major financial institution such as Wells Fargo.
"Our feeling is we hope it doesn't happen," said Stanley Pawlowski, El Camino's chairman. While Pawlowski could easily retire, other managers were planning on staying longer. Richard Helstrom, for instance, was hired as president only last fall.
Citizens Bank Chairman Paige V. Simpson, who was the architect of Citizens Holdings' growth plan, speculated that top executives would stay if KKR or another investor purchased the bank as part of a strategy to build a larger banking enterprise.
Pratt had planned to acquire separately operated small banks from Long Beach to the Mexican border and create a banking company with $1 billion in assets.
"Our overwhelming preference is for a new owner to carry on the same strategic plan we started," Schutt said. Under one prospective deal, he said, Pratt would remain a minority owner in the banking company.
Schutt said Citizens Holdings, owned through a maze of companies in a trust for Pratt's three children, is one of the Pratt family's diversified investment holdings. Schutt said Pratt's decision to sell the banks was made for investment purposes.
"As an investor, we have a right to sell at an appropriate moment," said Schutt, who oversees both Pratt family investments here and the Pratt Group corrugated-paper production facilities in this country. "The value in the banks is rock solid, and we have had a share in making them larger, stronger and more valuable. We've been good shareholders."
Together, the banks had $269 million in assets at the end of December and earned a combined $4.7 million last year.
Another reason why the Pratt family decided to sell the banks is because most of its investments are located in the East.
Schutt, who was with Pratt's merchant bank in Hong Kong, came to Orange County to head Citizens Holdings four years ago when Pratt acquired Citizens Bank for about $12 million. Two years ago, the company launched its aggressive growth effort by buying El Camino for $17.5 million.
But two other deals that same year--for Eldorado Bank in Tustin and for Rancho Santa Fe National Bank in San Diego County--fell apart when new federal regulations on bank holding companies made it economically unfeasible to complete the deal.
Meantime, the Pratt Group acquired 200,000 acres of timberland, a plywood mill and a paper mill near Macon, Ga. It sold the timberland and plywood mill to concentrate on recycling paper products to make corrugated containers. It recently built a paper mill in Indiana devoted strictly to recycling paper.