The Middle Eastern investors seeking control of Financial General Bankshares Inc. raised their offer for the company by 50 percent yesterday and asked Financial General's management to end the long and costly fight for the Washington bank holding company.
Credit and Commerce American Investment said it was prepared to make a tender offer at $22.50 a share, equivalent to $136 million, for all of Financial General's 46.1 million shares.
CCAI earlier had offered $15 a share for the stock, which traded yesterday at 14 1/8. Trading was suspended by the American Stock Exchange after the new offer was made.
Financial General issued a statement saying its directors would meet "in due course" to consider the CCAI offer.
There was no other official comment from the company on the sweetened offer, but two of Financial General's largest shareholders welcomed the proposal.
"At least it's a sign they're not trying to completely steal the company," said Dr. Armand Hammer, chairman of Occidental Petroleum Co., who recently was named vice chairman of Financial General.
But Hammer added, "Anything less than double book vaule is too low." Book value of FG's stock is about $17.50 a share.
Hammer owns more than 5 percent of the stock of Financial General, about 315,000 shares, much of it purchased in the past year for $14 a share.
Financial General officials "have got to submit it (the $22.50 offer) to the shareholders. If they don't they're on very sharky soil," said Eugene B. Casey of Gaithersbury, the company's largest individual stockholder, with 687,000 shares.
Casey, like Hammer a Financial General board member, has urged company Chairman B.F. Saul II and President J. William Middendorf II to negotiate with the group trying to take control of the company.
The new offer was made in a letter to Financial General's board from Washington attorney Robert Altman on behalf of a group of Middle Eastern investors who own about 18.6 percent of the company's stock, 1.1 million shares.
The group includes Sheikh Kamal Adham, brother-in-law of the late King Saud of Saudi Arabia; Faisal Saud al-Fulaij, former president of Kuwait Airlines; and Abdullah Darwaish, financial manager for the ruling family of Abu Dhabi.
The Middle Eastern group began buying Financial General shares in late 1977 and last year was cited for violating Securities and Exchange Commission regulations by not making their purchase public. To settle the SEC complaint, the group agreed to make a public tender offer of at least $15 a share for all of FG's stock.
Under terms of the SEC settlement, the tender offer must be made by July 18 unless an extension is granted.
The tender offer has been blocked so far by a long court fight which is estimated to have cost each side more than $1 million in legal fees.
Altman asked FG's directors to endorse the $22.50 tender offer and to dismiss the legal actions. "It is in everyone's best interest to resolve the situation so that Financial General can avoid unnecessary expenses and achieve its full potential," he said.
The $22.50-a-share price is about 67 percent more than the recent price of the stock and is 95 percent more than the price at which the stock was trading before the $15 offer was announced, Atlman noted.
He asked FG's board "to assist CCAI in consummating this transaction" and "to help CCAI obtain necessary regulatory approvals."
CCAI is a Dutch company formed by the Middle Eastern group for tax purposes to make the offer for FG.
"In view of the lawsuits and proceedings that have been instituted to attempt to prevent the making of a tender offer, it would be difficult to implement this new proposal quickly without the cooperation of the board," Atlman's letter noted.
In an interview, Altman said the decision to raise the offer was "a business judgment made by the investors based on the circumstances."
Sources close to Financial General said the offer to make peace with the company's board was evidence that the Middle Eastern group could not succeed in an unfriendly takeover of the company.
One of the legal impediments to the tender offer is a Maryland law that prohibits unfriendly takeovers of banking companies. Altman has challenged the law in court, claiming it is unconstitutional.
There is no such federal law, but the Federal Reserve Board, which must approve the takeover, has never approved an unfriendly tender offer for a bank holding company.
Both those barriers could be eliminated if Financial General's board endorsed the offer, Altman noted.
In another overture to the management, Altman's letter said his clients "would welcome certain of the present directors to continue" if the takeover succeeds.
Raising the possibility that the Middle Eastern group might willing to accept less than full ownership of the company, the letter said "those share-holders who wish to retain their interest in Financial General may, of course, do so. We welcome them."
With assets of about $2.5 billion, Financial General is the second largest banking company in the Washington are after Riggs National Bank.
Financial General owns Union First National Bank of Washington, First American Bank of Virginia, First American Bank of Maryland, and several other banks in Virginia, Tennesse and New York.
Created before multistate banking companies were banned by federal law, Financial General is the only bank able to do business in the District of Columbia and its Maryland and Virginia suburbs.