Credit Unions: The Godfather Mergers - Part VIII

 

"We’re both part of the same hypocrisy.” – M. Corleone 

  "We were promised to be enlightened as to why BECU would accept the merger. That isn’t in here! [link Part VII] How come? Couldn’t come up with a single reason?" 

Our troll seems to be on the verge of dampening his britches!  Being all wet in these discussions is unhelpful, so lets proceed with the valuation of a credit union as a business. 

We saw in Part VII that SAFE CU [being used only as an example] has a net worth of @ $400 million. Those reserves legally belong to the 244,000 member-shareholders of SAFE. The 11 member Board of SAFE has decided to give that $400 million in cash away for no apparent good reason - instead of disbursing the $400 million to each SAFE member. Remember, any member of SAFE who would like to join BECU can do so today for free! [ at BECU: Membership is free! - link]. 

But to help our troll stay dry, here's why BECU should still jump at the merger, even after the $400 million in cash is distributed to the rightful owners - 244,000 SAFE member-shareholders.  

✅ First, there is again no dispute that BECU would still receive a thriving $4 billion asset business, 244,000 additional members, 21 branches in 13 cities, a knowledgeable, experienced, local staff, with a strong reputation for service. What's that worth?

✅ Second, BECU will be acquiring: " SAFE Credit Union is one of the fastest growing credit unions in the Sacramento, California area." -according to Caitlin Goettler, BECU Public Relations Manager 

✅ Third, successful, "fastest growing" businesses generally sell for a premium well in excess of their "book value". We're confident that the book value of SAFE is @$400 million [see link for calc.]. The premium paid by an acquirer for a financial institution can vary by location, clientele, product line, reputation and  track record; but the premium paid is generally between 150% (1.5X) to 200% (2X) of book value ($400 million)!  

✅ That would mean the approximate market value of SAFE Credit Union is between $600 million and $800 million in today's marketplace. 

Said another way, even after fairly distributing the $400 million in reserves to existing SAFE members; the acquiring institution [BECU in this example] would still be receiving a free, thriving, credit union worth $200 to $400 million!

✔ You can be certain that BECU with the help of Jefferies, LLC understands the value of SAFE Credit Union...

😎 It appears clear that the SAFE CU Board does not...

  "A lawyer with a briefcase can steal more than a hundred men with guns."  - Don Vito Corleone

** For the entire Godfather series click the "Godfather" button at top.