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Popular Agrees to Buy Whittier Thrift

Quaker City Bancorp's connection to Wal-Mart stores, where it has branches, catches the Puerto Rican bank's eye.

March 20, 2004|James F. Peltz | Times Staff Writer

Quaker City Bank is about to become truly Popular.

The 84-year-old Whittier savings and loan and its parent, Quaker City Bancorp, agreed Friday to be acquired by Puerto Rican bank Popular Inc. for $367 million in cash.

Popular already has 17 Banco Popular branches in Southern California that cater mostly to businesses. The proposed deal with Quaker City, analysts said, would help expand Popular's reach to the region's consumers, especially in Latino neighborhoods.

San Juan-based Popular also is expanding in the five other states where it operates -- Florida, Texas, Illinois, New York and New Jersey -- to take advantage of growing Latino communities in those areas, company executives noted.

Quaker City, with $1.8 billion in assets, mostly serves individuals in Los Angeles, Orange, Riverside, San Bernardino and San Diego counties. The retail thrift also operates 16 of its 27 branches inside Wal-Mart Stores Inc. locations.

The Wal-Mart connection was a key reason Quaker City appealed to Popular, Roberto Herencia, president of Popular's North America division, said in an interview. Wal-Mart, he said, "is a relationship we would love to continue exploring."

Several other financial institutions previously had approached Quaker City about a merger, but until Thursday "we didn't have an offer that we considered adequate," Quaker City Chief Executive Rick McGill said.

The proposed deal appears to be "an excellent match" and a "nice strategic acquisition for Popular," said Edward Carpenter, chief executive of Carpenter & Co., an Irvine investment bank that specializes in financial institutions.

Popular, with $36 billion in assets, agreed to pay $55 for each of Quaker City's common shares. In response, Quaker City's stock soared $7.96, or 17%, to $54.40 a share Friday, while Popular's stock slipped 24 cents to $43.66. Both trade on Nasdaq.

The purchase remains subject to approval by Quaker City's stockholders and banking regulators.

Herencia said Quaker City's thrifts would keep their name until the first quarter of 2005, when they would be converted to Banco Popular. But there are no plans to close any of Quaker City's branches, because they don't overlap with Banco Popular locations, he said.

McGill said no layoffs were planned at the Quaker City branches, either, although "there will be some staff reductions starting next year in certain support areas of the bank." He declined to say how many jobs were at risk. Quaker City employs 350 people overall.

Quaker City takes its name from its roots in Whittier, once dubbed "Quaker City" because the town was founded by members of the Christian sect, also known as the Society of Friends, in 1887. The late President Nixon was a Quaker who attended Whittier College.

Quaker City Bancorp went public a decade ago at $3.84 a share after adjusting for subsequent splits, McGill said, and the stock has had a steady climb over the last three years.

Indeed, Quaker City is selling at an opportune time, analysts said. Thrift earnings and stock prices in general are at peak levels in response to the long downturn in interest rates, making savings and loans attractive takeover targets.

And at Quaker City, in particular, there was no clear candidate to eventually succeed McGill, 57, as chief executive, said Michael McMahon, an analyst at investment firm Sandler O'Neill & Partners in San Francisco.

"If I was facing the same fundamentals, I would have to think seriously about hopping on that [buyout] train while it's still in the station," McMahon said.

After the acquisition, McGill would continue running the Quaker City branches, Herencia said.

Quaker City began opening branches in Wal-Mart stores after the retail giant approached the thrift with the idea five years ago, McGill said. The mass merchant has relationships with about 200 community banks that are store tenants, he added.

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