When two companies with the same majority owners look at merging, it's usually a question of when, not if.
So it went with the proposed combination of the first cousins of Southeast banking: First Citizens, one from North Carolina, the other from South Carolina.
The somewhat independent but intertwined franchises from Raleigh and Columbia announced June 10 a plan to merge in a deal valued at more than $600 million. The unified company would have assets of $30.7 billion and more than 575 branches in 18 states and Washington, D.C.
But like many family reunions, this pending get-together required some tough talk, maybe a little bickering and a bit of compromise to get everyone on board.
The back-and-forth is spelled out in a document that the acquirer and the larger of the two banks, Raleigh-based First Citizens BancShares Inc., filed recently with the Securities and Exchange Commission.
For simplicity's sake, the report refers to the two banks as "North" and "South," somewhat fitting in that representatives for the smaller Columbia-based lender displayed a rebellious streak as talks wore on.
The prospects of a merger between the banks had been talked about for years, given the mutual cross-ownership, but it wasn't until about a year ago that the idea gained serious traction.
"In the summer of 2013, senior management of North identified the acquisition of South as a potential synergistic opportunity that would enhance long-term stockholder value," according to the SEC filing.
Enter First Citizens BancShares CEO Frank Holding Jr., the third-generation leader of the much larger First Citizens North. He and his relatives own most shares of both banks. Also, Peter Bristow, who is married to one of Holding's sisters, is president of First Citizens South.
"In late 2013, Mr. Holding Jr. indicated to management of North that he believed various members of the Holding family would be receptive to the two organizations exploring the possibility of a combination," the filing says.
Preliminary talks began in late January about setting in motion an independent negotiation process between the two bank boards. At that point, Bristow and other directors with potential conflicts recused themselves from talks about the proposed transaction.
The negotiations then were assigned to separate committees made up of outside directors from the two banks who had no blood ties to the Holdings.
Even so, the family found a way to flex its collective muscle. On two occasions, advisers working for the South committee asked whether the Holdings would support another deal, such as a sale to another bank or a stock sale.
The first response, in April, was a firm no. At any price.
"Mr. Holding Jr. stated that the Holding family would not support the sale of South to any other party, regardless of premium, and would not support alternative transactions such as a public offering or recapitalization," according to the SEC filing. His sisters and mother confirmed their opposition in separate conversations that month.
In early May, the First Citizens North CEO "repeated" that he and his family wouldn't get behind an alternative deal, even if a would-be buyer offered "a significantly higher price" than what the Raleigh bank was offering.
By that point it was clear to the First Citizens South merger negotiators in Columbia that "the only realistic options ... were to remain independent or to engage in a transaction with North."
The Palmetto State panel didn't immediately bow to the family's wishes. It rejected the bigger cousin's opening all-stock bid in March. It then turned away two more formal offers.
After two months of horse trading, the two sides finally agreed to terms. The result was that First Citizens South shareholders can choose either to receive all stock or a combination of stock and cash.
After all that, the Holdings aren't guaranteed that they can put both banks under one family tent, even with their large controlling equity stakes. It's unlikely, but the deal will unravel if more than half of the rest of the shareholders of the Columbia-based franchise nix the deal.
The vote hasn't been scheduled.
Contact John McDermott at 937-5572.