October 7, 2010 12:05:00 PM
It''s hard to argue with jobs.
Cadence''s about-face on Wednesday, agreeing to be scooped up by a private investment firm one week after it had already agreed to be bought by Trustmark, is a positive outcome for the Starkville and Columbus communities. The Trustmark buyout would certainly have led to layoffs. Trustmark and Cadence operate large buildings practically across the street from each other in Columbus, and Trustmark would certainly have trimmed support staff at Cadence''s Starkville headquarters.
The deal is also better for taxpayers, though certainly not perfect. In banker''s terms, we''re still taking a haircut. The U.S. Treasury had a $44 million stake in Cadence, whose executives and board decided to buy into the Troubled Asset Relief Program. Community Bancorp is paying back $38 million. Trustmark was only offering $30 million. (The government would have gotten nothing if it was forced to shut down Cadence altogether, which it was poised to do just before the Trustmark deal was announced.)
The Cadence name remains in the community. Trustmark would have certainly rebranded its new branches.
And shareholders come out ahead. The Trustmark deal would have been worth about $2 a share to stockholders; the new deal is worth $2.50 a share. (Cadence shareholders get cash, not Trustmark stock, for their shares.)
Jobs. Name. Price. These were considerations Cadence CEO Lewis Mallory, in a Wednesday conference call, outlined as reasons for taking the Community Bancorp deal.
Of course, some of those jobs belong to Mallory and his executives -- the same group whose management missteps, along with the crippling recession, brought the bank to its knees. Most of its owners -- Cadence shareholders -- suffered huge losses, in some cases, millions. Count all the U.S. taxpayers among those who lost their shirts.
Despite Community Bancorp CEO Paul Murphy''s assurances that Cadence''s executive team will remain intact, we expect there will be some housecleaning at the new, privately owned Cadence. We imagine that cleaning will start at the top.
After all, the new owners have an investment to protect. We all see what happened to the previous owners'' investment.
tndawg commented at 10/11/2010 8:18:00 AM:
Thanks for the excellent coverage of the Cadence situation. You framed the entire matter accurately, didn't let management get away with laying the entire problem on the economy, and spoke to the benefits to the Golden Triangle of what appears to be the current outcome.
wpwatcher commented at 10/11/2010 1:10:00 PM:
Thanks for your Cadence coverage. I thought the Trustmark deal was about the best they could do, but see the advantages of the new deal. However, in celebrating the new deal, everyone needs to remember that the cash buyout to stockholders represents a return of about a dime out of each dollar that the stock was worth about 4 years ago. The emphasis has to be on the hundreds of millions in wealth lost to investors, as well as the huge amount of dividend income lost. It certainly has heavily damaged the investments of a lot of retired people. It is a huge disappointment for an institution like Cadence to fail and it will be an injustice if the upper management gets to stay on, be rewarded, and not brought to court to show why they should not have to pay for their failure of fiduciary responsibility to stockholders.
wpwatcher commented at 1/5/2011 2:57:00 AM:
There's no way to effectively cry anymore--the die is cast and the deal struck even if you voted against. So, the vast majority of stockholders (the legal owners of the bank) are simply being told that their shares are going to be bought out at $2.50 a share and they have no choice but to sell even though the stock was worth over 12 times that anmount 2 years ago!! It is a huge FAST SHUFFLE of the stockholders who are being forced to agree so they can salvage a dime on the dollar!! I looked back and much of mine was bought 30 years ago and some of the earlier stock was bringing over a hundred a share! Thiks was we have now been forced to liquidate at $2.50. Furthermore, the "smart" bankers we have working for us rejected Trtustmark's deal and therefore have had to pay TWO MILLION DOLLARS to Trustmark for not going through with the deal. Very few people seem to care, however. Acting more or less like lemmings being led to their doom.
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