Equitable Bancorporation of Baltimore has given up its search for someone to buy the company and instead announced a stock buy-back plan that will strengthen the control of Equitable's biggest shareholder.
The weekend announcement threw cold water on speculation about a takeover of Equitable that set off a flurry of buying and pushed the price of the company's stock up $4 last week.
Instead of selling out, Equitable plans to take off the market about a quarter of its outstanding common stock, a total of one million shares. The company will give shareholders the opportunity to trade their common stock for a new issue of subordinated debentures; each share of stock will be exchanged for a debenture worth $26.
The debenture swap, essentially equivalent to letting stockholders sell their shares for $26, is meant to placate investors who became irate when Equitable blocked a tender offer for its stock last spring.
At that time a group called LZH Associates acquired 27 percent of Equitable and said it wanted to buy another 13 percent for $27.50 a share.
Calling that offer too low, Equitable blocked the bid by agreeing to make Alfred Lerner--one member of the LZH group--its vice chairman. Lerner kept his 27 percent of Equitable's stock, but pledged not to buy more under an agreement with the bank.
That agreement called for Equitable to hire Kidder Peabody & Co. to seek "a suitable buyer" for the company. Several foreign investors were approached about buying the bank, third largest in Baltimore, but none was interested.
"The timing just wasn't right," for finding a buyer, Equitable Vice President Barbara B. Lucas said yesterday.
The company instead has decided it would be in the best interest of stockholders to give them the chance to exchange their shares for debentures, Lucas said.
The exchange offer will be made as soon as banking regulators give their approval, she added.
Lucas said Lerner does not plan to trade his Equitable stock for debentures. "It's not designed for him," but is meant to compensate stockholders who were unable to take advantge of Lerner's offer last spring, she added.