The tender by a
manner reasonably designedholder of Old Notes that is not validly withdrawn prior to
inform them of that change) and without limiting the manner in which we may choose to make any public announcement, we assume no obligation to publish, advertise or otherwise communicate any public announcement of this type other than by making a release to the Dow Jones News Service, PR Newswire or some other similar national news service.4
The exchange shall occur promptly after the expiration date (Page 36 ).
Uponof the exchange offer and that is accepted by us will constitute a binding agreement between us and the holder in accordance with the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal. By using the ATOP procedures to exchange offer (including, if the exchange offer is extended or amended, the terms and conditionsOld Notes, you will not be required to deliver a letter of any extension or amendment), we will accept for exchange, and will exchange, shares of CB Bancshares common stock validly tendered and not properly withdrawn promptly after the expiration date and promptly after they are tendered during any subsequent offering period that may apply.
Tendered shares may be withdrawn at any time priortransmittal to the exchange of those shares (Page 38).
Shares of CB Bancshares common stock tendered pursuantagent. However, by using the ATOP procedures to thetender and exchange offer may be withdrawn at any time prior to the expiration date, and, unless we previously accepted them pursuant to the exchange offer, may also be withdrawn at any time after , 2003.
We may provide a subsequent offering period (Page 37).
We may elect to provide a subsequent offering period of not less than three nor more than 20 business days after the acceptance of shares of CB Bancshares common stock pursuant to the exchange offer if the requirements of Rule 14d-11 under the Exchange Act have been met. You will not have the right to withdraw shares of CB Bancshares common stock thatOld Notes, you tender in the subsequent offering period, if any.
Shareholders must comply with the procedure for tendering shares (Page 39).
You cannot tender your shares until we commence the exchange offer and appoint an exchange agent, among other things.
Once the exchange offer commences, for you to validly tender shares of CB Bancshares common stock pursuant to the exchange offer:
•the exchange agent must receive at one of its addresses set forth on the back cover of this exchange offer (1) a properly completed and duly executed letter of transmittal, along with any required signature guarantees, or an agent's message in connection with a book-entry transfer, and any other required documents, and (2) either certificates for tendered shares of CB Bancshares common stock or if those shares of CB Bancshares common stock are tendered pursuant to the procedures for book-entry set forth below, confirmation of receipt of that tender (we refer to this confirmation below as a "book-entry confirmation"), in each case before the expiration date, or
•you must comply with the guaranteed delivery procedures set forth in "The Exchange Offer—Guaranteed Delivery" on page 41.
Reasons for the exchange offer (Page 23).
We are proposing the exchange offer and the CB Bancshares merger because we believe that the exchange offer and the CB Bancshares merger will benefit our shareholders, including CB Bancshares shareholders who would become CPF shareholders by means of the CB Bancshares acquisition, as well as customers, employees and the State of Hawaii. We believe that the CB Bancshares acquisition will create a stronger local alternative to better compete with the larger banks in the state. We believe customers would benefit in many ways, including an expanded menu of business and retail services, a particularly stronger commercial real estate capability and trust and wealth management services, an expanded branch network and increased number of ATMs available to customers, increased lending limits and increased resources.
5
Plans for CB Bancshares (Page 48).
We are making the exchange offer in order to acquire control of, and ultimately the entire equity interest in, CB Bancshares. The exchange offer is the first step in our acquisition of CB Bancshares and is intended to facilitate the acquisition of all shares of CB Bancshares common stock. We intend, as soon as possible after completion of the exchange offer, to seek to have CB Bancshares merge with CPF or a wholly-owned subsidiary of CPF. The purpose of the CB Bancshares merger would be to acquire all shares of CB Bancshares common stock not exchanged in the exchange offer. In the CB Bancshares merger, each outstanding share of CB Bancshares common stock (except for treasury shares of CB Bancshares and shares beneficially owned directly or indirectly by CPF for its own account (except shares held by CPF in a fiduciary capacity)) would be converted into the right to receive the acquisition consideration that was offered to CB Bancshares shareholders in the exchange offer, subject to dissenters' rights under Hawaii law and subject to proration.
In order to complete the exchange offer, CPF must first obtain federal and state regulatory approvals (Page 55).
In order to complete the exchange offer, we must obtain the prior written approval of, or confirmation that prior written approval is not required by, the Board of Governors of the Federal Reserve System under the Bank Holding Company Act. A request for their approval or confirmation was filed on April 28, 2003. We also filed an application with the Hawaii Commissioner of Financial Institutions on April 28, 2003 for permission to acquire shares of CB Bancshares common stock pursuant to the exchange offer. In addition, we cannot complete the offer to exchange unless the offer is effective pursuant to Section 417E of the Hawaii Business Corporation Act or the offer is exempted from these requirements. We have requested a no action letter or an exemptive order from the Hawaii State Commissioner of Securities.
Dividend policy of CPF (Page 19).
The holders of CPF common stock receive dividends if and when declared by our board of directors out of legally available funds. We and our predecessor have paid regular semiannual cash dividends since 1958. Beginning in 1988, we commenced paying quarterly cash dividends. For the first quarter of 2003, we paid, on April 25, 2003, a cash dividend of $0.16 per common share to shareholders of record as of March 31, 2003.
Following completion of the CB Bancshares acquisition, we expect to continue paying quarterly cash dividends on a basis consistent with our past practice. However, the declaration and payment of dividends will depend upon business conditions, operating results, capital and reserve requirements, covenants in our debt instruments and our board of directors' consideration of other relevant factors. We can give shareholders no assurance that we will continue to pay dividends on our common stock in the future.
Dividend policy of CB Bancshares (Page 20)
The following description is based on our understanding of CB Bancshares' dividend policy as derived from its publicly available documents.
The holders of CB Bancshares common stock receive dividends if and when declared by CB Bancshares' board of directors out of legally available funds. The principal source of CB Bancshares' cash flow has been dividend payments received from City Bank. Under the laws of Hawaii, payment of dividends by City Bank is subject to certain restrictions, and payment of dividends by CB Bancshares is likewise subject to certain restrictions. CB Bancshares evaluates the dividend on a quarterly basis.
6
There are no dissenters' rights in connection with the exchange offer although dissenters' rights will exist in connection with the CB Bancshares merger (Page 47).
No dissenters' rights are available in connection with the exchange offer. If the CB Bancshares merger is consummated, however, CB Bancshares shareholders will have certain rights under the Hawaii Business Corporation Act to dissent and demand dissenters' rights and to receive payment in cash of the fair value of their shares. CB Bancshares shareholders who perfect such rights by complying with the procedures set forth in Sections 414-351, 414-352, 414-354 and 414-359 will have the fair value of their shares of CB Bancshares common stock determined by a Hawaii trial court and will be entitled to receive a cash payment equal to such fair value from the surviving corporation. In addition, such dissenting shareholders would be entitled to receive payment of a fair rate of interest at a rate determinedbound by the trial court on the amount determined to be the fair value of their shares of CB Bancshares common stock. In determining the fair value of the shares, the court may appoint appraisers to receive evidence and recommend decisions on the question of fair value. A copy of Sections 414-351, 414-352, 414-354 and 414-359 of the Hawaii Business Corporation Act is provided in Annex B.
There are material differences in rights of shareholders (Page 66 ).
The governing documents of CPF and CB Bancshares vary, and to that extent, CB Bancshares shareholders will have different rights once they become CPF shareholders. The differences are described in more detail under "Comparison of Rights of Holders of CPF Common Stock and CB Bancshares Common Stock" beginning on page 66.
We will account for the CB Bancshares merger using the purchase method (Page 57).
We will account for the merger as a purchase for financial reporting purposes.
Forward-looking statements may prove inaccurate (Page 73).
We have made forward-looking statements in this document, and in certain documents referred to in this document, that are subject to risks and uncertainty. Such statements include, but are not limited to, (i) statements about the benefits of the proposed merger, including future financial and operating results, costs savings and accretion to reported and cash earnings that may be realized from such merger; (ii) statements with respect to our plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets", "projects" and other similar expressions. These statements are based upon our current beliefs and expectations and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
•our business and the business of CB Bancshares may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected;
•expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame;
•revenues following the merger may be lower than expected;
•deposit attrition, operating costs, customer loss and business disruption, including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers, may be greater than expected following the merger;
7
•the regulatory approvals required for the merger may not be obtained on the proposed terms;
•our shareholders or CB Bancshares' shareholders may fail to approve the merger;
•competitive pressures among depository and other financial institutions may increase significantly and may have an effect on pricing, spending, third-party relationships and revenues;
•the strength of the United States economy in general and the strength of the Hawaii economy may be different than expected, resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on the combined company's loan portfolio and allowance for loan losses;
•changes in the U.S. legal and regulatory framework; and
•adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the combined company's activities.
Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.
With respect to financial projections for CB Bancshares contained in this document, neither CB Bancshares nor any analyst has published any information for 2003, 2004 or 2005. In addition, we have not been given the opportunity to do any due diligence on CB Bancshares other than reviewing its publicly available information. Therefore, we have created our own financial model for CB Bancshares based on its historical performance and our assumptions regarding the reasonable future performance of CB Bancshares on a stand-alone basis. These assumptions may or may not prove to be correct. The assumptions are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of CB Bancshares. There is no assurance that these projections will be realized and actual results are likely to differ significantly from such projections.
8
RISK FACTORS
In deciding whether to tender shares of CB Bancshares common stock for exchange pursuant to the exchange offer, you should read carefully this exchange offer and all other documents attached to or incorporated by reference into this exchange offer. You should, in particular, read and consider the following risk factors, as well as the other risks associated with each of the businesses of CB Bancshares and CPF, because these risks also will affect the combined businesses should the merger be completed. These other risks associated with the businesses of CB Bancshares and CPF can be found in CB Bancshares' and CPF's respective Annual Reports on Form 10-K for the year ended December 31, 2002 and CB Bancshares' and CPF's documents filed subsequent thereto with the SEC and incorporated by reference into this document. Additional risks and uncertainties not presently known to CB Bancshares or us also may adversely affect the merger and us following the merger.
There are uncertainties in integrating our business operations and those of CB Bancshares (including their and our subsidiary banks) and in realizing enhanced earnings for the combined company.
The merger involves the integration of companies that have previously operated independently. Successful integration of CB Bancshares' consolidated operations will depend primarily on our ability and the ability of our subsidiary bank, Central Pacific Bank, to consolidate operations, systems and procedures with CB Bancshares and its subsidiary bank, City Bank, to eliminate redundancies and costs. No assurance can be given that CB Bancshares and CPF and their subsidiary banks will be able to integrate their operations without encountering difficulties, including, without limitation, the loss of key employees and customers, the disruption of their respective ongoing businesses or possible inconsistencies in standards, controls, procedures and policies.
The combined company's results may be affected if:
•the combination of the businesses of CPF and CB Bancshares and their subsidiary banks takes longer, or is more difficult, time-consuming or costly to accomplish than expected;
•the expected growth opportunities and cost savings from the CB Bancshares merger are not fully realized or take longer to realize than expected; or
•operating costs, customer losses and business disruption following the CB Bancshares merger, including adverse effects on relationships with employees, are greater than expected.
If any of these risks were to occur, the business, operations and/or earnings of the combined company could be negatively affected.
The stock portion of the acquisition consideration is directly related to the market value of CPF's common stock.
We calculate the consideration that you receive for each share of CB Bancshares exchanged by reference to the average price of CPF common stock over a 20-day period ending on one trading day prior to the expiration date. The per share consideration is determined by adding $21.00 to the product of 1.8956 and the average price of CPB common stock. Accordingly, a portion of the actual value of the acquisition consideration to CB Bancshares shareholders will fluctuate based on the market price of shares of CPF common stock.
The receipt of CPF common stock could be taxable to you depending on facts surrounding the exchange offer and the CB Bancshares merger.
We do not plan to request a ruling from the Internal Revenue Service with regard to the tax consequences of the exchange offer and/or the CB Bancshares merger. The exchange offer and the CB Bancshares merger are expected to qualify as component parts of an integrated transaction that
9
qualifies as a reorganization within the meaning of Section 368(a) of the Code provided that certain factual assumptions are satisfied. If the transaction does not qualify as a reorganization, your exchange of shares of CB Bancshares common stock for the CPF common stock portion of the consideration in the exchange offer or the CB Bancshares merger could be a taxable transaction, depending on the surrounding facts. In any event, the cash portion of the consideration, including cash you may receive in lieu of fractional shares, will be taxed to you as either a capital gain or a dividend, depending on your circumstances. You are urged to consult your tax advisors concerning the United States federal income and other tax consequences of participation in the exchange offer and/or the CB Bancshares merger. For more information see "The Exchange Offer—Material U.S. Federal Income Tax Consequences of the Exchange Offer and the CB Bancshares Merger" beginning on page 42.
The exchange offer may reduce the liquidity of CB Bancshares common stock and could result in its delisting from the Nasdaq National Market.
The tender of shares of CB Bancshares common stock pursuant to the exchange offer will reduce the number of holders of shares of CB Bancshares common stock and the number of shares of CB Bancshares common stock that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining shares of CB Bancshares common stock held by the public. Shares of CB Bancshares common stock are listed and principally traded on the Nasdaq National Market. Depending on the number of shares of CB Bancshares common stock acquired pursuant to the exchange offer, following the completion of the exchange offer and before the CB Bancshares merger, shares of CB Bancshares common stock may no longer meet the requirements of the Nasdaq National Market for continued listing.
Resales of CPF common stock following the offer to exchange may cause the market price of that stock to fall.
As of February 28, 2003, we had 16,006,748 shares of common stock outstanding and 923,940 shares subject to outstanding options and other rights to purchase or acquire. Based upon publicly available information on CB Banc shares, we expect that we will issue a maximum of 7,805,000 shares in connection with the exchange offer and the CB Bancshares merger. The issuance of these new shares and the sale of additional shares of our common stock that may become eligible for sale in the public market from time to time upon exercise of options could have the effect of depressing the market price for our common stock.
The trading price of CPF common stock may be affected by factors different from those affecting the price of CB Bancshares common stock.
Upon completion of the exchange offer and the CB Bancshares merger, holders of CB Bancshares common stock will become holders of CPF common stock. Our business differs from that of CB Bancshares, and CPF's results of operations, as well as the trading price of CPF common stock, may be affected by factors different from those affecting CB Bancshares' results of operations and the price of CB Bancshares common stock.
We may be unable to retain personnel who are key to our and CB Bancshares' businesses.
The success of our operations is dependent on, among other things, our ability to attract and retain highly qualified professional personnel. Competition for key personnel in the various localities and business segments in which we operate is intense. Our ability to attract and retain key personnel, in particular senior officers, is dependent on a number of factors, including prevailing market conditions and compensation packages offered by companies competing for the same talent. These same pressures and concerns also apply to CB Bancshares' business.
10
There are risks related to the businesses of CPF and CB Bancshares.
Results of operations of CPF and CB Bancshares are subject to numerous risks affecting their respective businesses, many of which are beyond the companies' control, as described in the respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2002 for each of CPF and CB Bancshares.
11
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our unaudited historical ratios of earnings to fixed charges for each of the years in the five-year period ended December 31, 2002 and the unaudited pro forma combined ratios of earnings to fixed charges of us and CB Bancshares for the year ended December 31, 2002.
The unaudited pro forma ratios of earnings to fixed charges are based upon our and CB Bancshares historical financial statements adjusted to give effect to the CB Bancshares acquisition. The pro forma amounts have been developed from (a) our audited consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002 which is incorporated by reference in this exchange offer, and (b) CB Bancshares' audited consolidated financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2002 which is incorporated by reference in this exchange offer.
| | Pro Forma
| | CPF Historical Data
|
|---|
| | Year Ended December 31,
|
|---|
| | 2002
| | 2002
| | 2001
| | 2000
| | 1999
| | 1998
|
|---|
| Ratio of earnings to fixed charges: | | | | | | | | | | | | |
| | Excluding interest on deposits | | 3.37 | | 5.92 | | 3.82 | | 3.17 | | 3.49 | | 3.48 |
| | Including interest on deposits | | 1.89 | | 2.42 | | 1.71 | | 1.53 | | 1.53 | | 1.50 |
For purposes of computing the rations of earnings to fixed charges, earnings include income before income taxes plus fixed charges minus preference security dividend requirements of consolidated subsidiaries. Fixed charges, excluding interest on deposits, consist of interest expense minus interest on deposits plus an estimate of interest included in net rental expense and preference security dividend requirements of consolidated subsidiaries. Fixed charges, including interest on deposits, consist of the above items plus interest on deposits. The ratios should be read in conjunction with the financial statements and other financial data included or incorporated by reference in this exchange offer. See "Where Can I Find More Information?" beginning on page 71.
12
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA
The Unaudited Pro Forma Condensed Combined Financial Data set forth below is based upon the historical financial statements of CPF and CB Bancshares adjusted to give effect to the CB Bancshares acquisition. The pro forma financial statements have been developed from (a) the audited consolidated financial statements of CPF contained in our Annual Report on Form 10-K for the year ended December 31, 2002, which is incorporated by reference in this exchange offer, and (b) the audited consolidated financial statements of CB Bancshares contained in its Annual Report on Form 10-K for the year ended December 31, 2002, which is incorporated by reference in this exchange offer.
The final determination and allocation of the purchase price paid for the CB Bancshares acquisition may differ from the amounts assumed in this Unaudited Pro Forma Condensed Combined Financial Data.
As of the date of this exchange offer, we have not done any due diligence and have not completed the valuation studies necessary to arrive at the required estimates of the fair market value of the CB Bancshares assets to be acquired and liabilities to be assumed and the related allocations of purchase price, nor have we identified the adjustments necessary, if any, to conform CB Bancshares data to our accounting policies. Accordingly, we have used the historical book values of the assets and liabilities of CB Bancshares and have used the historical revenue recognition policies of CB Bancshares to prepare the Unaudited Pro Forma Condensed Combined Financial Statements set forth herein, with the excess of the purchase price over the historical net assets of CB Bancshares recorded as goodwill and other purchased intangibles. Once we have completed the due diligence and the valuation studies necessary to finalize the required purchase price allocations and identified any necessary conforming changes, such pro forma financial statements will be subject to adjustment. Such adjustments will likely result in changes to the pro forma statement of financial position to reflect the final allocations of purchase price and the pro forma statements of income, and there can be no assurance that such adjustments will not be material.
The Unaudited Pro Forma Condensed Combined Financial Data is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations or the consolidated financial position of CPF would have been had the CB Bancshares acquisition occurred on the dates assumed, nor is it necessarily indicative of future consolidated results of operations or financial position.
The Unaudited Pro Forma Condensed Combined Financial Data does not include the realization of cost savings from operating efficiencies, synergies or other restructurings resulting from the CB Bancshares acquisition.
The Unaudited Pro Forma Condensed Combined Financial Data should be read in conjunction with the separate historical consolidated financial statements and accompanying notes of CPF and CB Bancshares that are incorporated by reference in this exchange offer and the Unaudited Pro Forma Condensed Combined Financial Statements on page 58.
13
Selected Unaudited Pro Forma Condensed Combined Financial Data
(In thousands, except per share data)
The following table sets forth selected unaudited pro forma condensed combined financial data for CPF after giving effect to the CB Bancshares acquisition. The pro forma information, which reflects the CB Bancshares acquisition using the purchase method of accounting, is presented for informational purposes only. The pro forma financial information should not be construed as indicative of the actual operations that would have occurred had the CB Bancshares acquisition occurred at the date or at the beginning of the periods indicated or that may be obtained in the future.
| | Year Ended
December 31, 2002
| |
|---|
| Selected Operating Data | | | | |
| Total interest income | | $ | 224,796 | |
| Total interest expense | | | 61,595 | |
| Net pro forma adjustments | | | (2,431 | ) |
| | |
| |
| | Net interest income | | | 163,201 | |
| Provision for loan losses | | | 18,110 | |
| | |
| |
| | Net interest income after provision for loan losses | | | 145,091 | |
| Total other operating income | | | 28,097 | |
| Total other operating expense | | | 111,797 | |
| | |
| |
| | Income before income taxes | | | 61,391 | |
| Income taxes | | | 18,578 | |
| | |
| |
| | Net income | | $ | 42,813 | |
| | |
| |
| Basic earnings per share from continuing operations | | $ | 1.80 | |
| Diluted earnings per share from continuing operations | | $ | 1.77 | |
| Weighted average basic shares outstanding | | | 23,735 | |
| Weighted average diluted shares outstanding | | | 24,130 | |
| | December 31, 2002
|
|---|
| Selected Balance Sheet Data | | | |
| Total assets | | $ | 3,821,556 |
| Net loans | | | 2,300,967 |
| Total deposits | | | 2,804,328 |
| Shareholders' equity | | | 372,776 |
| Basic book value per share | | $ | 15.68 |
| Shares outstanding | | | 23,777 |
14
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
CPF
The following selected consolidated financial data for CPF have been derived from, and are qualified by reference to, the audited consolidated financial statements and notes thereto contained in CPF's Annual Reports on Form 10-K for the years ended December 31, 2002, 2001, 2000, 1999 and 1998, which were filed with the SEC. See "Where Can I Find More Information?" for information on where such documents are available. You should read this summary financial information together with the financial statements and notes thereto referred to above.
Selected Consolidated Financial Information
(Dollars in thousands, except per share data)
| | As of or For the Year Ended December 31,
|
|---|
| | 2002
| | 2001
| | 2000
| | 1999
| | 1998
|
|---|
| Consolidated statements of income data: | | | | | | | | | | | | | | | |
| | Total interest income | | $ | 118,462 | | $ | 129,873 | | $ | 126,783 | | $ | 112,840 | | $ | 111,792 |
| | Total interest expense | | | 29,483 | | | 51,421 | | | 55,559 | | | 44,418 | | | 46,705 |
| | |
| |
| |
| |
| |
|
| | | Net interest income | | | 88,979 | | | 78,452 | | | 71,224 | | | 68,422 | | | 65,087 |
| | Provision for loan losses | | | 1,000 | | | 3,000 | | | 4,500 | | | 3,700 | | | 6,600 |
| | |
| |
| |
| |
| |
|
| | | Net interest income after provision for loan losses | | | 87,979 | | | 75,452 | | | 66,724 | | | 64,722 | | | 58,487 |
| | Total other operating income | | | 15,282 | | | 14,113 | | | 12,887 | | | 13,103 | | | 16,822 |
| | Total other operating expense | | | 55,023 | | | 50,683 | | | 49,592 | | | 53,448 | | | 51,273 |
| | |
| |
| |
| |
| |
|
| | | Income before income taxes | | | 48,238 | | | 38,882 | | | 30,019 | | | 24,377 | | | 24,036 |
| | Income taxes | | | 14,955 | | | 10,177 | | | 10,585 | | | 8,051 | | | 8,967 |
| | |
| |
| |
| |
| |
|
| | | Net income | | $ | 33,283 | | $ | 28,705 | | $ | 19,434 | | $ | 16,326 | | $ | 15,069 |
| | |
| |
| |
| |
| |
|
| | | Net income available for common stock | | $ | 33,283 | | $ | 28,705 | | $ | 19,434 | | $ | 16,326 | | $ | 15,069 |
| | |
| |
| |
| |
| |
|
| Per share amounts: | | | | | | | | | | | | | | | |
| | Basic earnings per share | | $ | 2.09 | | $ | 1.75 | | $ | 1.09 | | $ | 0.85 | | $ | 0.73 |
| | Diluted earnings per share | | | 2.04 | | | 1.72 | | | 1.07 | | | 0.84 | | | 0.73 |
| | Diluted book value per share | | | 10.58 | | | 9.10 | | | 8.30 | | | 7.59 | | | 7.52 |
Balance sheet data at period end: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | Total assets | | $ | 2,028,163 | | $ | 1,835,641 | | $ | 1,816,918 | | $ | 1,646,491 | | $ | 1,560,885 |
| | Cash and due from banks | | | 62,273 | | | 39,820 | | | 52,207 | | | 83,425 | | | 42,735 |
| | Total investment securities | | | 540,924 | | | 391,947 | | | 384,619 | | | 321,670 | | | 351,436 |
| | Loans | | | 1,289,892 | | | 1,266,949 | | | 1,290,145 | | | 1,167,466 | | | 1,099,677 |
| | Allowance for loan losses | | | 24,197 | | | 24,564 | | | 22,612 | | | 20,768 | | | 20,066 |
| | Other real estate | | | 1,903 | | | 812 | | | 1,792 | | | 1,366 | | | 1,155 |
| | Total deposits | | | 1,641,101 | | | 1,450,925 | | | 1,363,066 | | | 1,305,654 | | | 1,269,123 |
| | Long-term debt | | | 147,155 | | | 175,572 | | | 220,970 | | | 98,279 | | | 118,289 |
| | Total shareholders' equity | | | 173,443 | | | 147,070 | | | 143,312 | | | 144,079 | | | 148,066 |
15
CB Bancshares
The following selected consolidated financial data for CB Bancshares have been derived from, and are qualified by reference to, the audited consolidated financial statements and notes thereto contained in CB Bancshares' Annual Reports on Form 10-K for the years ended December 31, 2002, 2001, 2000, 1999 and 1998. See "Where Can I Find More Information?" for information on where such documents are available. You should read this summary financial information together with the financial statements and notes thereto referred to above.
Selected Consolidated Financial Information
(Dollars in thousands, except per share data)
| | As of or For the Year Ended December 31,
|
|---|
| | 2002
| | 2001
| | 2000
| | 1999
| | 1998
|
|---|
| Consolidated statements of income data: | | | | | | | | | | | | | | | |
| Total interest income | | $ | 106,945 | | $ | 128,254 | | $ | 132,472 | | $ | 111,233 | | $ | 112,060 |
| Total interest expense | | | 30,292 | | | 57,448 | | | 71,478 | | | 52,717 | | | 53,811 |
| | |
| |
| |
| |
| |
|
| | Net interest income | | | 76,653 | | | 70,806 | | | 60,994 | | | 58,516 | | | 58,249 |
| Provision for loan losses | | | 17,110 | | | 13,628 | | | 7,539 | | | 4,975 | | | 7,436 |
| | |
| |
| |
| |
| |
|
| | Net interest income after provision for loan losses | | | 59,543 | | | 57,178 | | | 53,455 | | | 53,541 | | | 50,813 |
| Total other operating income | | | 12,815 | | | 2,817 | | | 10,024 | | | 10,328 | | | 9,789 |
| Total other operating expense | | | 52,618 | | | 50,595 | | | 46,679 | | | 58,336 | | | 46,768 |
| | |
| |
| |
| |
| |
|
| | Income before income taxes | | | 19,740 | | | 9,400 | | | 16,800 | | | 5,533 | | | 13,834 |
| Income taxes | | | 6,258 | | | 3,250 | | | 5,582 | | | 5,227 | | | 5,465 |
| | |
| |
| |
| |
| |
|
| | Net income | | $ | 13,482 | | $ | 6,150 | | $ | 11,218 | | $ | 306 | | $ | 8,369 |
| | |
| |
| |
| |
| |
|
| | Net income available for common stock | | $ | 13,482 | | $ | 6,150 | | $ | 11,218 | | $ | 306 | | $ | 8,369 |
| | |
| |
| |
| |
| |
|
| Per share amounts: | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 3.49 | | $ | 1.60 | | $ | 2.88 | | $ | 0.07 | | $ | 1.98 |
| Diluted earnings per share | | | 3.43 | | | 1.58 | | | 2.88 | | | 0.07 | | | 1.97 |
| Diluted book value per share | | | 37.95 | | | 35.07 | | | 31.84 | | | 29.15 | | | 31.28 |
| Balance sheet data at period end: | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,674,358 | | $ | 1,586,040 | | $ | 1,721,602 | | $ | 1,619,549 | | $ | 1,428,438 |
| Cash and due from banks | | | 75,069 | | | 22,395 | | | 40,172 | | | 66,918 | | | 61,658 |
| Total investment securities | | | 370,234 | | | 261,969 | | | 364,215 | | | 356,030 | | | 270,847 |
| Loans | | | 1,160,963 | | | 1,242,942 | | | 1,301,358 | | | 1,152,731 | | | 1,079,297 |
| Allowance for loan losses | | | 27,123 | | | 19,464 | | | 17,447 | | | 17,942 | | | 17,771 |
| Other real estate | | | 2,193 | | | 4,674 | | | 3,458 | | | 6,385 | | | 8,583 |
| Total deposits | | | 1,163,227 | | | 1,138,435 | | | 1,218,463 | | | 1,106,145 | | | 1,084,610 |
| Long-term debt | | | 319,407 | | | 214,424 | | | 181,563 | | | 225,140 | | | 171,087 |
| Total shareholders' equity | | | 144,253 | | | 128,666 | | | 118,132 | | | 127,567 | | | 128,889 |
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COMPARATIVE PER SHARE DATA
The following table sets forth selected historical and pro forma per share consolidated financial data for CPF and CB Bancshares as of and for the year ended December 31, 2002. The historical information presented for CPF and CB Bancshares is derived from the historical consolidated financial statements of CPF and CB Bancshares contained in their Annual Reports on Form 10-K for the year ended December 31, 2002.
The pro forma combined information, which gives effect to the CB Bancshares acquisition under the purchase method of accounting, is presented for informational purposes only. The pro forma information should not be construed as indicative of the actual operations that would have occurred had the CB Bancshares acquisition occurred at the dates or at the beginning of the periods indicated or that may be obtained in the future. The pro forma information assumes that the CB Bancshares acquisition had been completed on the dates and at the beginning of the earliest period presented.
You should read the information set forth below in conjunction with the audited consolidated financial statements of CPF and CB Bancshares incorporated by reference in this document. See "Where Can I Find More Information?" on page 71 for information on how you can get a copy of the financial reports of CPF and CB Bancshares.
| | Year Ended December 31, 2002
|
|---|
| | Historical
| |
| |
|
|---|
| | CPF
| | CB
Bancshares
| | Pro Forma
Combined(1)
| | Per Equivalent
CB Bancshares
Share(2)
|
|---|
| Earnings per share from continuing operations: | | | | | | | | | | | | |
| | Basic | | $ | 2.09 | | $ | 3.49 | | $ | 1.80 | | $ | 3.41 |
| | Diluted | | | 2.04 | | | 3.43 | | | 1.77 | | | 3.36 |
Dividends declared—Common |
|
|
0.40 |
|
|
0.44 |
|
|
0.40 |
|
|
0.76 |
Book value per share—Basic(3) |
|
|
|
|
|
|
|
|
|
|
|
|
| | As of December 31, 2002 | | | 10.86 | | | 38.74 | | | 15.68 | | | 29.72 |
| Book value per share—Diluted(3) | | | | | | | | | | | | |
| | As of December 31, 2002 | | | 10.58 | | | 37.95 | | | 15.40 | | | 29.19 |
(1)The pro forma per share earnings from continuing operations are computed by dividing the pro forma income from continuing operations available to holders of common stock by the pro forma weighted average number of shares outstanding. The pro forma combined book value per share is computed by dividing total pro forma shareholders' equity by the pro forma number of common shares outstanding at the end of the period. The pro forma combined per share data assumes that 7,582,400 shares of CPF common stock are issued in the CB Bancshares acquisition, based on 3,898,580 CB Bancshares shares outstanding as of March 3, 2003. See "The Exchange Offer—Consideration to be Paid," beginning on page 30.
(2)CB Bancshares equivalent pro forma combined per share amounts are calculated by multiplying pro forma combined per share amounts by 1.8956, the number of CPF shares that would be exchanged as the stock portion of the acquisition consideration for each share of CB Bancshares common stock.
(3)Book values were calculated using period-end shares outstanding.
17
MARKET PRICE DATA AND DIVIDEND INFORMATION
Comparative Market Data
CPF's common stock trades on the NYSE under the symbol "CPF" and CB Bancshares' common stock trades on the Nasdaq National Market under the symbol "CBBI". The following table presents trading information for CPF and CB Bancshares common stock on:
•April 15, 2003—the last trading day before the public announcement of CPF's proposal for a business combination of CPF and CB Bancshares; and
•April , 2003—the last trading day before the date of this exchange offer.
CB Bancshares equivalent per share amounts are calculated by multiplying our per share amounts by 1.8956, the percentage of a share of our common stock that would be exchanged for each share of CB Bancshares common stock in the exchange offer. You should read the information presented below in conjunction with "—Historical Market Price and Dividend Information" on page 19.
| | CPF Common Stock
| | CB Bancshares
Common Stock
| | CB Bancshares
Equivalent Per Share
|
|---|
| | HIGH
| | LOW
| | CLOSING
| | HIGH
| | LOW
| | CLOSING
| | HIGH
| | LOW
| | CLOSING
|
|---|
| April 15, 2003 | | 25.85 | | 25.50 | | 25.56 | | 45.98 | | 45.50 | | 45.50 | | | | | | |
| April , 2003 | | | | | | | | | | | | | | | | | | |
You should obtain current market quotations for CPF common stock. The market price of CPF common stock will probably fluctuate between the date of this document and the date the exchange offer and the merger are completed and after their completion. Because the market price of CPF common stock is subject to fluctuation, the value of the shares of CPF common stock that you may receive in the exchange offer or the merger may increase or decrease prior to and after the completion of those transactions.
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Historical Market Price and Dividend Information
The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share reported on the NYSE and/or Nasdaq National Market(2) for CPF common stock and the Nasdaq National Market for CB Bancshares common stock and the dividends declared on CPF common stock and on CB Bancshares common stock.
| | CPF Common Stock(1)
| | CB Bancshares
Common Stock
|
|---|
| | High
| | Low
| | Dividends
| | High
| | Low
| | Dividends
|
|---|
| 2000 | | | | | | | | | | | | | | | | | | |
| | March 31, 2000 | | $ | 14.565 | | $ | 11.00 | | $ | 0.075 | | $ | 24.69 | | $ | 19.42 | | $ | 0.07 |
| | June 30, 2000 | | | 14.625 | | | 10.375 | | | 0.075 | | | 21.07 | | | 18.80 | | | 0.07 |
| | September 30, 2000 | | | 13.50 | | | 12.00 | | | 0.075 | | | 23.76 | | | 20.35 | | | 0.10 |
| | December 31, 2000 | | | 14.155 | | | 12.125 | | | 0.08 | | | 23.76 | | | 20.66 | | | 0.10 |
| 2001 | | | | | | | | | | | | | | | | | | |
| | March 31, 2001 | | $ | 15.00 | | $ | 12.38 | | $ | 0.08 | | $ | 28.72 | | $ | 21.49 | | $ | 0.11 |
| | June 30, 2001 | | | 15.10 | | | 11.01 | | | 0.08 | | | 32.72 | | | 26.45 | | | 0.11 |
| | September 30, 2001 | | | 18.74 | | | 13.69 | | | 0.09 | | | 34.68 | | | 27.50 | | | 0.11 |
| | December 31, 2001 | �� | | 16.15 | | | 13.63 | | | 0.09 | | | 32.68 | | | 29.15 | | | 0.11 |
| 2002 | | | | | | | | | | | | | | | | | | |
| | March 31, 2002 | | $ | 17.43 | | $ | 14.63 | | $ | 0.09 | | $ | 34.21 | | $ | 30.45 | | $ | 0.11 |
| | June 30, 2002 | | | 23.38 | | | 17.00 | | | 0.10 | | | 40.87 | | | 33.52 | | | 0.11 |
| | September 30, 2002 | | | 23.68 | | | 13.82 | | | 0.10 | | | 40.22 | | | 33.05 | | | 0.11 |
| | December 31, 2002 | | | 31.24 | | | 22.16 | | | 0.11 | | | 43.00 | | | 35.02 | | | 0.11 |
| 2003 | | | | | | | | | | | | | | | | | | |
| | March 31, 2003 | | $ | 31.08 | | $ | 25.14 | | $ | 0.16 | | $ | 50.50 | | $ | 40.90 | | $ | 0.11 |
| | April , 2003 | | | | | | | | | | | | | | | | | | |
(1)Adjusted for a 2-1 stock split effected on November 8, 2002.
(2)On December 31, 2002, we transfered our common stock listing to the NYSE from the Nasdaq National Market; therefore all prices included above for dates prior to December 31, 2002 are per share prices as reported on the Nasdaq National Market.
On , 2003, the last full trading day prior to the date of this exchange offer, the last sale price per share of our common stock on the NYSE was $ and the last sale price per share of CB Bancshares common stock on the Nasdaq National Market was $ .
We urge you to obtain current market quotations for CPF and CB Bancshares common stock before making any decision regarding the exchange offer.
Dividend Policies
We and our predecessor have paid regular semi-annual cash dividends on the common stock since 1958. Beginning in 1988, we commenced paying regular quarterly cash dividends. We expect to continue to pay regular quarterly cash dividends. However, since substantially all of the funds available for the payment of dividends are derived from Central Pacific Bank, future dividends will depend upon Central Pacific Bank's earnings, its financial condition, its capital needs, applicable governmental policies and regulations and such other matters as CPF's board of directors may deem to be appropriate.
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Our ability to pay dividends is also limited by certain restrictions imposed on Hawaii corporations. We may pay dividends out of funds legally available at such times as our board of directors determines are appropriate.
CB Bancshares' ability to pay dividends is limited by certain restrictions generally imposed on Hawaii corporations. CB Bancshares may pay dividends out of funds legally available at such times as the Board of Directors determines are appropriate.
The principal source of our and CB Bancshares' cash flow has been dividend payments received from Central Pacific Bank and City Bank, respectively. Under the laws of Hawaii, payment of dividends by Central Pacific Bank and City Bank is subject to certain restrictions, and payment of dividends by us and CB Bancshares is likewise subject to certain restrictions. We and CB Bancshares consider such factors as the Federal Reserve Board's indication that it would generally be an unsafe and unsound banking practice for banks to pay dividends except out of current operating earnings and that an insured depository institution, such as Central Pacific Bank and City Bank, cannot make a capital distribution (broadly defined to include, among other things, dividends, redemptions and other repurchases of stock), or pay management fees to its holding company if, thereafter, the depository institution would be undercapitalized. In addition, applicable regulatory authorities are authorized to prohibit banks, thrifts and their holding companies from paying dividends which would constitute an unsafe and unsound banking practice.
20
INFORMATION ABOUT CPF AND CB BANCSHARES
CPF
General
We are a Hawaii corporation, and a bank holding company registered under the Bank Holding Company Act of 1956, as amended, or the Bank Holding Company Act. Pursuant to a plan of reorganization and agreement of merger, we were organized on February 1, 1982 to serve as a holding company for our subsidiary, Central Pacific Bank. Central Pacific Bank was incorporated in its present form in the State of Hawaii on March 16, 1982 in connection with our holding company reorganization, and our predecessor entity was incorporated in the State of Hawaii on January 15, 1954. Central Pacific Bank's deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, up to applicable limits. As a bank holding company, we have the flexibility to directly or indirectly engage in certain bank-related activities other than banking, subject to regulation by the Board of Governors of the Federal Reserve System, or the Federal Reserve Board.
Central Pacific Bank owns 100% of the outstanding stock of Central Business Club of Honolulu, Inc., whose principal business is the operation of a private food service facility. Central Pacific Bank also owns 99.8% and we own 0.2% of the outstanding common stock of CPB Real Estate, Inc. ("CPBREI"), a real estate investment trust, which acquires, holds and manages stable, long-term real estate related assets including residential mortgage loans, commercial real estate loans and mortgage-backed securities.
Central Pacific Bank
Central Pacific Bank, a state-chartered bank, organized under the laws of the State of Hawaii in 1982, is a full-service commercial bank that has 24 banking offices and 77 ATMs located throughout the State of Hawaii. Central Pacific Bank's administrative and main offices are located in Honolulu, and there are eighteen other branches on the Island of Oahu. In addition, Central Pacific Bank operates two branches on the Island of Maui, one branch on the Island of Kauai and two branches on the Island of Hawaii.
Through its network of banking offices, Central Pacific Bank emphasizes personalized services and offers a full range of banking services to small-and medium-sized businesses, professionals and individuals in Hawaii.
Central Pacific Bank offers a variety of deposit instruments. These include personal and business checking and savings accounts, including interest-bearing negotiable order of withdrawal ("NOW") accounts, money market accounts and time certificates of deposit. Lending activities of Central Pacific Bank include granting of commercial, consumer and real estate loans. Central Pacific Bank offers inventory and accounts receivable financing, furniture, fixture and equipment financing, short-term operating loans, and commercial real estate and construction loans. Consumer loans include home equity lines of credit, loans for automobiles, home improvement and debt consolidation, personal and professional lines of credit and other installment and term loans for other personal needs. Central Pacific Bank offers credit cards and VISA check cards, a debit card service, and is a member of the Star and Plus ATM Networks. Central Pacific Bank also offers an internet banking service through its website at www.cpbi.com as well as an Infoline service, providing telephonic account information and funds transfer services.
Other services of Central Pacific Bank designed to serve the needs of businesses and individuals include investment and life insurance services, business PC banking, travelers' checks, safe deposit boxes, international banking services, night depository facilities and wire transfer services. Central Pacific Bank's Trust Division offers asset management and custody services for a variety of accounts including revocable and irrevocable trusts, agency accounts, guardianships of property, charitable remainder trusts and probates.
21
Based on total consolidated assets at December 31, 2002, CPF is the third largest bank holding company in the State of Hawaii and Central Pacific Bank, with $2.0 billion in assets, is the third largest commercial bank in the state, maintaining approximately 7% of the deposit market share. In order to compete with the other financial services providers in the State of Hawaii, Central Pacific Bank principally relies upon local promotional activities, personal relationships established by officers, directors and employees with its customers, and specialized services tailored to meet the needs of the communities served. Central Pacific Bank seeks to be competitive by offering attractive pricing and superior service levels.
The principal office of CPF is located at 220 South King Street, Honolulu, Hawaii 96813, and its telephone number is (808) 544-0500.
Additional information concerning CPF is included in the CPF documents incorporated by reference in this exchange offer. See "Where Can I Find More Information?" beginning on page 71.
CB Bancshares
The following information is derived from CB Bancshares' publicly available documents.
General
CB Bancshares is a bank holding company registered under the Bank Holding Company Act and was incorporated in the State of Hawaii in 1980. As a bank holding company, CB Bancshares has the flexibility to directly or indirectly engage in certain bank-related activities other than banking, subject to regulation by the Board of Governors of the Federal Reserve System, or the Federal Reserve Board. CB Bancshares has three wholly owned subsidiaries, City Bank, Datatronix Financial Services, Inc. ("Datatronix") and O.R.E., Inc. (inactive), which are discussed below. On July 1, 2000, International Savings and Loan Association, Limited, a wholly owned subsidiary of CB Bancshares, merged with City Bank.
City Bank
City Bank is a state-chartered bank which was organized under the laws of the State of Hawaii in 1959. City Bank is insured by the FDIC and provides full commercial banking services through seventeen branches on the Island of Oahu, one branch on the Island of Hawaii, two branches on the Island of Maui and one branch on the Island of Kauai. These services include receiving demand, savings and time deposits; making commercial, real estate and consumer loans; financing leases and leasing activities; financing international trade activities; issuing letters of credit; handling domestic and foreign collections; selling travelers' checks and bank money orders; and renting safe deposit boxes.
City Bank's primary focus has been corporate lending to small-to-medium-sized businesses by maintaining relationships and expertise within business segments and providing personal customer service.
Datatronix Financial Services, Inc.
Datatronix Financial Services, Inc., a wholly owned subsidiary, was incorporated in the State of Hawaii in June 2000 and opened for business on July 1, 2000. Datatronix offers item processing services to banks, thrifts, credit unions and other financial institutions in the State of Hawaii. As of December 31, 2002, Datatronix had three customers, with City Bank as its primary customer.
The principal office of CB Bancshares is located at 201 Merchant Street, Honolulu, Hawaii 96813, telephone number (808) 535-2500.
Additional information concerning CB Bancshares is included in the CB Bancshares documents incorporated by reference in this offer to exchange. See "Where Can I Find More Information?" beginning on page 71.
22
BACKGROUND OF THE EXCHANGE OFFER
Background
From time to time during the past few years, we have considered expanding our respective operations through acquisitions of other companies. In December 1999, CB Bancshares approached CPF to discuss a proposal to combine the companies. CB Bancshares proposed that their senior management team assume key management positions in the resulting company. CPF's management discussed the proposal with its board of directors and rejected the offer.
In May 2002, CPF approached CB Bancshares with a proposal to acquire their company in a stock merger transaction. CB Bancshares declined to accept the proposal.
On February 26, 2003, we began purchasing shares of CB Bancshares common stock in the open market. We accumulated 2.27% of CB Bancshares' outstanding common stock by March 13, 2003. On March 17, 2003, representatives of Bear, Stearns & Co. Inc., our financial advisor in connection with the proposed CB Bancshares acquisition, met informally with Ronald K. Migita, the President and Chief Executive Officer of CB Bancshares, and Dean K. Hirata, the Chief Financial Officer of CB Bancshares, to present our offer to merge with CB Bancshares. After their presentation, Bear Stearns stated that our Chairman and Chief Executive Officer was standing by and would like to personally deliver a written offer consistent with the Bear Stearns presentation. Messrs. Migita and Hirata refused to meet with Mr. Arnoldus, and Bear Stearns then attempted to give the first offer letter to Mr. Migita and Mr. Hirata, who declined to accept it. On March 19, 2003, Mr. Migita communicated with the representatives of Bear Stearns and requested a meeting for April 2, 2003 to obtain additional information concerning the offer.
On March 21, 2003, Clint Arnoldus, our Chief Executive Officer, messengered the March 17, 2003 offer letter to Mr. Migita at CB Bancshares. On March 24, 2003, our Chief Financial Officer, spoke with Mr. Dean Hirata and confirmed receipt of the March 21, 2003 letter with the first offer letter attached thereto.
On April 2, 2003, Messrs. Arnoldus and Kanda and Mr. Migita, Richard Lim and Warren Y. Kunimoto of CB Bancshares met to discuss the first offer letter. Also in attendance were representatives of Bear Stearns.
At that meeting, Mr. Arnoldus reviewed our view of the benefits of the merger to the shareholders, employees, customers, and communities in which both companies operate. Bear Stearns reviewed again the assumptions underlying the pricing of the offer and other financial aspects of the merger, including consolidation and cost savings opportunities. Mr. Arnoldus also indicated our desire to add representatives of CB Bancshares' board to our board of directors following the merger and a willingness to discuss appropriate positions for CB Bancshares' senior management. During this discussion Messrs. Migita and Lim stated that, notwithstanding that CPF shareholders would own approximately 68% of the outstanding shares of the surviving corporation with the shareholders of CB Bancshares owning approximately 32%, senior management of CB Bancshares should become senior management of the merged company because, in their view, they were of superior quality. It was also revealed during this meeting that CB Bancshares' board of directors had not yet met, or scheduled a meeting, to consider the offer, and that CB Bancshares' board of directors had not retained a financial advisor or special legal counsel. Messrs. Arnoldus and Kanda were left with the impression that the CB Bancshares' board of directors had not received, or otherwise been informed of the terms of the March 17 offer letter.
At the conclusion of the April 2, 2003 meeting, the officers of CB Bancshares indicated that they would contact us by April 4 to inform us of CB Bancshares' proposed timetable. No one at CB Bancshares contacted us by that date to discuss a timetable for the offer or the offer itself. As a result, on April 4, 2003, we sent another copy of our March 17, 2003 offer to each of CB Bancshares'
23
directors to eliminate any doubt as to whether the CB Bancshares board of directors had received it, and requested a reply by April 11, 2003. While CB Bancshares acknowledged receipt of our letter, we received no reply to its terms, other than CB Bancshares' request not to send any more communications to their directors but only to communicate with Mr. Migita.
On April 16, 2003, we entered into a voting agreement with TON Finance, B.V., pursuant to which TON agreed to vote 295,587 shares of its CB Bancshares common stock in favor of the CB Bancshares acquisition, which, when added to the shares we own, represent slightly less than 9.9% of CB Bancshares' outstanding shares. TON has agreed to vote the remaining 52,677 of its CB Bancshares shares in favor of the CB Bancshares merger only after any required shareholder approval under the Hawaii Control Share Acquisitions statute, which is described below under "Conditions to the Exchange Offer—Control Share Condition." On April 25, 2003, we filed a Schedule 13D, which describes the voting agreement.
On April 16, 2003, we sent a letter to CB Bancshares dated April 15, 2003, setting forth again our offer for a business combination between CB Bancshares and CPF. The terms of the April 15 letter were equivalent to those of our March 17 letter. On April 16, 2003, we issued a press release which attached a copy of the letter.
The full text of the CPF letter is as follows:
April 15, 2003
Board of Directors
CB Bancshares, Inc.
201 Merchant Street
Honolulu, Hawaii 96813
Attention: | | Mr. Ronald K. Migita
President and Chief Executive Officer |
Dear Mr. Migita:
We are very disappointed by CB Bancshares, Inc.'s ("CB") lack of response to our March 17th offer to combine CPB Inc. ("CPB") and CB Bancshares, Inc. through a cash-and-stock transaction valued at $70 per share (the "Merger"), which represents a 62.3% premium over your unaffected stock price (the price on February 25, 2003, the day before CPB began buying in the open market the 88,741, or 2.27%, of the outstanding CB shares we currently own). Our proposal also presents a unique opportunity to create a stronger Hawaii-focused bank with enhanced capability to deliver superior results for your shareholders and benefits to your customers, employees and the State of Hawaii—benefits that CB cannot realistically expect to achieve on its own in the foreseeable future.
The preservation of our unique island culture requires Hawaii-based business institutions that can compete with mainland-based and foreign-owned banks. The resurgence of our island economy depends on strong banks focused on the small to medium sized businesses that will help drive economic recovery. Our combination would create a competitive Hawaii-based bank whose lending, investing and contribution decisions would be made locally, by people who know, understand and love Hawaii.
History of this Proposal
The basic terms of this offer were outlined in a meeting held between certain members of CB's senior management and our financial advisor, Bear, Stearns & Co. Inc., on March 17, 2003. In response to your refusal to receive our written offer, or to meet with us on that day, we
24
delivered our March 17th offer to you on March 21, 2003. You agreed to meet with us on April 2, 2003, for the limited purpose of clarifying the proposal, but were unwilling to enter into substantive discussions. At that meeting, you also told us that your Board had not met, or scheduled a meeting, to consider our offer, and that no financial advisor had been retained by your Board.
At the conclusion of the April 2nd meeting, you indicated that you would contact us by April 4th to inform us of your proposed timetable. You did not contact us by that date or thereafter. As a result, on April 7th we sent another copy of our March 17th offer to each of your directors to eliminate any doubt that they had not received it, and requested a reply by April 11th. While you acknowledged receipt of our letter, no reply to its terms was received. In short, despite our numerous efforts to meet and confer on this combination, we have not received any meaningful response from CB Bancshares to our offer.
The Combined Company
We believe the merger of our banks will create a much stronger and higher performing company through:
•The financial strength to compete more effectively for customers and better address the needs of the residents and businesses of Hawaii;
•The anticipated significant accretion to earnings per share of the combined company;
•CB shareholders' participation in future growth through their ownership of NYSE-listed CPB common stock to be received in the Merger;
•A dividend increase of approximately 290% over CB's current payout rate;
•A strong balance sheet and high quality loan portfolio, with excellent access to the capital markets;
•A very strong management team with a record of consistent performance; and
•Additional career opportunities for high performing employees who contribute to the success of the resulting company.
Based on the significant premium we are offering and the anticipated performance of the resulting company, we believe that if given the opportunity to act on our proposal, your shareholders would enthusiastically accept it. Indeed, your largest shareholder, TON Finance, B.V., has agreed to vote 295,587 shares of its CB common stock (which, when added to the shares CPB owns, represent slightly less than 9.9% of CB's outstanding shares) in favor of the Merger, a tender/exchange offer CPB may make prior to the Merger, and other proposals having the intended effect of facilitating such transactions, at any CB shareholders' meeting considering or in connection with the solicitation of consents from CB shareholders for approval of such transactions. TON Finance, B.V., has further agreed to vote the remaining 52,677 of its shares under its voting agreement with us only after receipt of any required shareholder approval under the Hawaii Control Share Acquisitions Statute, but until such time retains the right to vote these shares in its discretion.
Terms of Our Proposal
For all these reasons, we would like to review the key elements of our proposal, based upon a transaction to be negotiated with you, as follows:
1.Offer Price. We are prepared to offer 1.8956 shares of CPB's NYSE-listed common stock plus $21 in cash for each share of CB common stock. Based on CPB's closing price on April 14,
25
2003, this represents an offer of $70 per CB share, comprised of approximately 30% in cash and 70% in CPB common stock (the "Merger Consideration"). The Merger Consideration represents a premium of 62.3% over CB's closing price as reported on the NASDAQ on February 25, 2003, the day before CPB started to buy CB's shares on the open market, and a 54% premium over the closing price on April 14, 2003.
2.Structure. The combination will be accomplished through a merger of CPB and CB (the "Merger") with CPB being the resulting corporation. The Merger will be structured so that the CPB stock received in the Merger should be tax-free to CB's shareholders. Central Pacific Bank and City Bank will also be merged immediately following the Merger, with Central Pacific Bank being the resulting bank.
3.Treatment of Stock Options. Any options to acquire shares of CB that remain unexercised upon consummation of the Merger will be converted into options to acquire shares of CPB, with appropriate adjustments to reflect the Merger.
4.Employee Benefits. All CB employees will be eligible to participate in CPB's benefit programs and will receive credit for their tenure at CB.
5.Board Representation and Management. In connection with our negotiations we would discuss what number of members of CB's current Board of Directors would be appropriate to add to CPB's Board of Directors following the merger. We propose that the resulting corporation establish an Advisory Board to include those current members of CB's Board of Directors who do not join CPB's Board of Directors following the Merger plus additional prominent community members to be selected by the resulting corporation's Board. We would also discuss appropriate roles for CB's current management team with the understanding that I would continue as Chairman, President, and Chief Executive Officer of CPB following the Merger.
6.Conditions. The terms of the Merger will be set forth in detail in a definitive merger agreement, which would contain representations, warranties and conditions customary for a transaction of this type, including, without limitation, all necessary determinations by your Board of Directors to exempt this transaction under your Shareholder Rights Plan and under the Control Share Acquisitions Act of the State of Hawaii. Such conditions would include, but not be limited to, satisfactory completion of due diligence, receipt of all necessary regulatory, shareholder and corporate approvals, and the absence of any material adverse changes. Customary protections for the transaction (e.g., break-up fees, non-competition agreements) will be included. We anticipate that the definitive agreement will be negotiated and prepared in conjunction with our due diligence process.
Given the significant premium that we are offering to your shareholders, and the obvious benefits the Merger would provide to all of CB's stakeholders, we are puzzled by your failure to respond meaningfully to our offer for more than four weeks. Our strong preference is to negotiate the structure and terms of this combination and the various factors involved for a successful integration of our companies with your Board of Directors, but if you continue to refuse to discuss our proposal and prevent your shareholders from considering it, we reserve the right to bring it directly to the CB shareholders for their consideration. In view of the significance of our proposal to both companies and their shareholders, we intend to publicly announce our proposal on Wednesday, April 16, 2003.
I would like to reiterate our strong preference to work with you in a professional and constructive manner to complete this transaction so that its full potential can be realized. If you have any questions, please call me. We continue to be available—as we have been for the last month—to meet with you or any member of your management or Board of Directors to review
26
this proposal and the benefits we see in this combination and to negotiate the terms of a definitive agreement.
The Board of Directors and I continue to believe that the transaction we are proposing is in the interests of both companies' shareholders and all our other constituencies—the customers, the employees, the community and the State of Hawaii. We hope that you and your Board of Directors reconsider your consistent refusal to consider the merits of this combination. We are not, however, prepared to allow an indefinite amount of time to elapse. Therefore, we request that you respond to this proposal before 12 noon, Honolulu time, on April 25, 2003.
| | Very truly yours, |
|
|
 |
| | Clint Arnoldus
Chairman, President
and Chief Executive Officer |
On April 16, 2003, we held a press conference to announce the proposed business combination publicly to ensure that CB Bancshares' stockholders were aware of the offer. Throughout the rest of the week after April 16, 2003 and the week of April 21, 2003, we discussed the offer with local news media and in conversations with stockholders and investors.
On April 28, 2003, we requested that CB Bancshares call a special meeting, and delivered an information statement, in accordance with Hawaii's Control Share Acquisitions statute so that CB Bancshares shareholders could vote on our acquisition of CB Bancshares common stock pursuant to our exchange offer.
On April 28, 2003, we filed applications with the Federal Reserve Bank of San Francisco pursuant to the Bank Holding Company Act and with the Hawaii Commissioner of Financial Institutions for prior approval to acquire control of CB Bancshares and, indirectly, City Bank.
27
REASONS FOR THE EXCHANGE OFFER
We believe that the proposed CB Bancshares acquisition presents a unique opportunity to create a stronger locally based and locally managed bank for Hawaii. Compelling opportunities exist to better serve our community, customers, employees and shareholders. The combined company would have expanded banking services and lending capacity benefiting both our community and customers. The combination would create the potential for revenue enhancements, cost savings and great market and client penetration. We believe that it would also bring enhanced liquidity and increased market capitalization, potentially doubling the daily trading of our common stock, thus benefiting our shareholders. We anticipate that the combined company would be accretive to earnings by 2004.
Reasons for the Exchange Offer and the Merger
We and our board of directors believe that the CB Bancshares acquisition is in the best interest of us and our shareholders and CB Bancshares and their shareholders. Accordingly, our board of directors unanimously approved the exchange offer and the CB Bancshares merger. In reaching its decision, the board of directors consulted with CPF's management, legal counsel and investment bankers. Our board of directors considered a number of factors, to which relative weights were not assigned, including the following:
•The best interests of CPF, our subsidiaries, our shareholders and our banking customers including, among other things, the anticipated financial strength of the combined company and expanded choices, convenience and capacity for our customers;
•The business, operations, financial condition and earnings of CPF and CB Bancshares on an historical and a prospective basis and of the combined company on a pro forma basis;
•The financial condition and prospects of CPF and CB Bancshares, including but not limited to results of operations, capital levels and asset quality;
•Our board's familiarity with and review of CB Bancshares' business, operations, financial condition and earnings on an historical and a prospective basis;
•The dominance in the Hawaii market of a relatively small number of major banks with many offices operating over a wide geographic area, and opportunities for the combined company to gain additional market share following the merger;
•The then-current and prospective economic and regulatory environment, burdens and constraints affecting banking organizations and commercial banks such as CPF and CB Bancshares and the changing competitive environment for banking services;
•The consolidation and increasing competition in the banking and related industries, and the expectation that the combined company will have over $3.8 billion in assets, potentially giving it greater access to financial, managerial and technological resources and making the combined company a more effective competitor in the banking and related industries;
•The complementary nature of our business and the business of CB Bancshares, which could potentially provide revenue enhancement opportunities for the combined company, based on such things as:
•An increased ability to cross-sell a wider variety of banking products and services;
•The opportunity to generate increased loan and fee income as a result of the higher lending limits available to the combined entity;
•The opportunity to leverage certain expenses; and
28
•The opportunity to achieve cost savings, operating efficiencies and other opportunities for revenue enhancement.
•The likelihood that the CB Bancshares acquisition will be approved by the appropriate regulatory authorities;
•The acquisition consideration to be paid to CB Bancshares shareholders in relation to the book value and earnings per share of CB Bancshares' common stock, and in relation to the market prices and acquisition prices paid for comparable companies in the United States over the past several years;
•Industry and economic conditions;
•The expanded menu of business and retail services, including a strong commercial real estate capability and trust and wealth management services, and the increased lending limits and resources we anticipate that the combined entity would offer;
•The probable impact of the CB Bancshares acquisition on the depositors, employees, customers, suppliers, creditors and communities served by CPF and CB Bancshares through expanded commercial, consumer and retail banking products and services; and
•The ability of the combined company after the CB Bancshares acquisition to compete in relevant banking and non-banking markets.
In making its determination, the CPF board of directors did not ascribe any relative or specific weights to the factors that it considered. The foregoing discussion of the factors considered by the CPF board of directors is not intended to be exhaustive, but it does include the material factors considered by the board.
The only information available to us regarding CB Bancshares is information that they have made publicly available. If we conduct due diligence, our beliefs about the benefits of the CB Bancshares acquisition may change.
There are numerous factors, other than the CB Bancshares acquisition, that could cause our results of operations, including, among other things, earnings per share, to increase or decrease after the CB Bancshares acquisition. Therefore, we cannot assure you that the anticipated benefits of the CB Bancshares acquisition discussed in the previous paragraphs will happen. You should read "Risk Factors" on pages 9 through 11 and "Forward-Looking Statements" on pages 73 through 74 for a discussion of the factors that could affect our future operations and financial condition.
29
THE EXCHANGE OFFER
Consideration to Be Paid
You may elect to receive cash, CPF common stock or a combination of cash and stock for each of your CB Bancshares common shares that are validly tendered and not properly withdrawn, subject, in each case, to the election and proration procedures described in this prospectus and the related letter of transmittal, form of election. Based on the closing price of CPF common stock on , 2003 of $25.00,and you would receive consideration with a value of $68.39, which is determined by adding $21.00 to the product of 1.8956 and $ , the average price.
Election and Proration Procedures
Making the Election. You may elect to receive cash, shares of CPF common stock or a combination of cash and shares of CPF common stock in exchange for your shares of CB Bancshares common stock. Your election may be subject to proration, however, which means that you may not receive all the consideration in the form that you selected. The value of the consideration that you receive for each share you exchange will be the same, regardless of the type of election you make.
If you elect to receive a combination of cash and stock, which we call a fixed election, you will receive, for each CB Bancshares share you exchange, $21.00 in cash and 1.8956 shares of CPF common stock. If you elect to receive the maximum amount of cash, which we call a cash election, or the maximum amount of stock, which we call a stock election, the amount of cash and/or stock that you receive will be determined by reference to the average price of CPF common stock over a 20-day period ending one trading day prior to the closing of the exchange offer, which we refer to as the average CPF price. All shares for which an election is not made will be referred to as undesignated shares. All undesignated shares will be deemed to have made a fixed election.
30
Ifthe acknowledgements and the representations and warranties it contains, just as if you make a cash electionhad signed it.
We will determine all questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old Notes in our sole discretion, and our determination will be final and binding on all parties. We reserve the absolute right, in our sole and absolute discretion, to reject any and all Old Notes not validly tendered or
a stock election our election may be subject to proration, which means that you may not receive considerationany Old Notes whose acceptance by us would, in the
form that you selected.See "—Proration" below for more information about proration. Atopinion of our counsel, be unlawful. We also reserve the closing of the exchange offer, we will determine the value of the consideration that you will receive for each share you exchange, regardless of the type of election made. That value is called the per share consideration, which will be determined by adding $21.00 to the product of 1.8956 and the average CPF price. For a fixed election, a share will receive $21.00 and 1.8956 shares of CPF common stock. Assuming that no proration is necessary, for a cash election, each share will receive cash in the amount of the per share consideration, and for a stock election each share will receive an amount of stock equal to the per share consideration divided by the average CPF price. Although the shares receive different types of consideration, the value of the consideration received by each share is the same.
You will not receive any fractional shares of CPF common stock in the exchange offer. Instead, you will receive cash in an amount equal to the value of the fractional share of CPF common stock that you would otherwise have been entitled to receive.
Assuming that no proration is necessary, the chart below shows the type and value of consideration you would receive for each share of CB Bancshares common stock based on your election and fluctuations in the average price of CPF common stock:
Average
Price
| | Per Share
Consideration
| |
| | Fixed Election
| | Cash
Election
| | Stock Election
|
|---|
| $20.00 | | $ | 58.9120 | | Consideration received | | $21.00 + 1.8956 shares | | $ | 58.9120 | | 2.9455 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $20.00) =$58.9120 |
|
$ |
58.9120 |
|
2.9455 × $20.00 =$58.9120 |
$22.00 |
|
$ |
62.7032 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
62.7032 |
|
2.8500 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $22.00) =$62.7032 |
|
$ |
62.7032 |
|
2.8500 × $22.00 =$62.7032 |
$24.00 |
|
$ |
66.4944 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
66.4944 |
|
2.7704 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $24.00) =$66.4944 |
|
$ |
66.4944 |
|
2.7704 × $24.00 =$66.4944 |
$25.00 |
|
$ |
68.3900 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
68.3900 |
|
2.7356 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $25.00) =$68.3900 |
|
$ |
68.3900 |
|
2.7356 × $25.00 =$68.3900 |
$26.00 |
|
$ |
70.2856 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
70.2856 |
|
2.7035 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $26.00) =$70.2856 |
|
$ |
70.2856 |
|
2.7035 × $26.00 =$70.2856 |
$28.00 |
|
$ |
74.0768 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
74.0768 |
|
2.6457 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $28.00) =$74.0768 |
|
$ |
74.0768 |
|
2.6457 × $28.00 =$74.0768 |
$30.00 |
|
$ |
77.8680 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
77.8680 |
|
2.5957 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $30.00) =$77.8680 |
|
$ |
77.8680 |
|
2.5957 × $30.00 =$77.8680 |
31
Proration.
The total amount of cash that we will pay CB Bancshares shareholders in exchange for their shares, which we call the total cash consideration, will not exceed the product of $21.00 and the number of CB Banchares accepted at the close of the exchange offer. The total number of shares of CPF common stock that we will issue and deliver to CB Bancshares stockholders in exchange for their shares, which we call the total stock consideration, will not exceed the product of 1.8956 and the number of CB Bancshares accepted at the close of the exchange offer. As a result, if you make a cash election or stock election, the consideration you receive may be subject to proration.
•The number of shares for which fixed elections have been made and shares for which no election has been made, will receive $21.00 in cash and 1.8956 shares of CPF common stock, regardless of the CPF average price.
•If the number of shares for which cash elections have been made divided by the number of shares for which stock elections have been made isgreater than the number reached by dividing $21.00 by the product of 1.8956 and the CPF average price, all the shares for which stock elections were made will receive stock, but the shares for which cash elections were made will receive both cash and the amount of stock remaining after distribution of stock in exchange for which fixed elections, stock elections, and no elections were made.
•If the number of shares for which cash elections have been made divided by the number of shares for which stock elections have been made isless than the number reached by dividing $21.00 by the product of 1.8956 and the average CPF price, all the shares for which cash elections were made will receive cash, but the shares for which stock elections were made will receive both stock and the amount of cash remaining after distribution of cash in exchange for shares for which fixed elections and cash elections were made.
The following are examples of the possible effects of proration on those tendering in the exchange offer.
Case 1: After distribution of cash to shares of CB Bancshares for which a fixed election or no election was made, payment for the number of shares of CB Bancshares for which the cash election is made would be greater than the remaining amount of cash available for payment under the offer.
Assuming the following:
•A fixed election or no election was made by 50% of the shares of CB Bancshares accepted in the exchange offer;
•A cash election was made by 40% of the shares of CB Bancshares accepted in the exchange offer; and
•A stock election was made by 10% of the shares of CB Bancshares accepted in the exchange offer.
In this scenario:
•those shares for which the fixed election or no election was made will get $21.00 in cash and 1.8956 shares of CPF common stock
•those shares for which the cash election was made will get a mixture of cash and CPF common stock; and
•those shares for which the stock election was made will get solely shares of CPF common stock.
32
The chart below shows the type and value of consideration you would receive for each share of CB Bancshares common stock based on the assumptions above, your election and fluctuations in the average price of CPF common stock:
Average
Price
| | Per Share
Consideration
| |
| | Fixed Election
| | Cash Election
* subject to proration
| | Stock Election
|
|---|
| $20.00 | | $ | 58.9120 | | Consideration received | | $21.00 + 1.8956 shares | | $26.25 + 1.633 shares | | 2.9455 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $20.00) =$58.9120 |
|
$26.25 + (1.633 × $20.00) =$58.9120 |
|
2.9455 x $20.00 =$58.9120 |
$22.00 |
|
$ |
62.7032 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$26.25 + 1.6568 shares |
|
2.8500 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $22.00) =$62.7032 |
|
$26.25 + (1.6568 × $22.00) =$62.7032 |
|
2.8500 x $22.00 =$62.7032 |
$24.00 |
|
$ |
66.4944 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$26.25 + 1.6767 shares |
|
2.7704 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $24.00) =$66.4944 |
|
$26.25 + (1.6767 × $24.00) =$66.4944 |
|
2.7704 x $24.00 =$66.4944 |
$25.00 |
|
$ |
68.3900 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$26.25 + 1.6852 shares |
|
2.7356 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $25.00) =$68.3900 |
|
$26.25 + (1.6852 × $25.00) =$68.3900 |
|
2.7356 x $25.00 =$68.3900 |
$26.00 |
|
$ |
70.2856 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$26.25 + 1.6935 shares |
|
2.7035 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $26.00) =$70.2856 |
|
$26.25 + (1.6935 × $26.00) =$70.2856 |
|
2.7035 x $26.00 =$70.2856 |
$28.00 |
|
$ |
74.0768 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$26.25 + 1.7082 shares |
|
2.6457 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $28.00) =$74.0768 |
|
$26.26 + (1.7082 × $28.00) =$74.0768 |
|
2.6457 x $28.00 =$74.0768 |
$30.00 |
|
$ |
77.8680 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$26.25 + 1.7207 shares |
|
2.5957 shares |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $30.00) =$77.8680 |
|
$26.25 + (1.7207 × $30.00) =$77.8680 |
|
2.5957 x $30.00 =$77.8680 |
Case 2: After distribution of CPF common stock to shares of CB Bancshares tendered for which a fixed or no election was made, the number of shares of CPF common stock to be issued for the number of shares of CB Bancshares for which the stock election is made would be greater than the remaining number of shares of CPF common stock available for issuance under our offer.
Assuming the following:
•A fixed election or no election was made by 50% of the shares of CB Bancshares accepted in the exchange offer;
33
•A cash election was made by 10% of the shares of CB Bancshares accepted in the exchange offer; and
•A stock election was made by 40% of the shares of CB Bancshares accepted in the exchange offer.
In this scenario:
•those shares for which the fixed election or no election was made will get $21.00 in cash and 1.8956 shares of CPF common stock;
•those shares for which the cash election was made will get all cash; and
•those shares for which the stock election was made will get a mixture of cash and shares of CPF common stock.
The chart below shows the type and value of consideration you would receive for each share of CB Bancshares common stock based on the assumptions above, your election and fluctuations in the average price of CPF common stock:
Average
Price
| | Per Share
Consideration
| |
| | Fixed Election
| | Cash
Election
| | Stock Election
* subject to proration
|
|---|
| $20.00 | | $ | 58.9120 | | Consideration received | | $21.00 + 1.8956 shares | | $ | 58.9120 | | 2.3695 shares + $11.5220 |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $20.00) =$58.9120 |
|
$ |
58.9120 |
|
(2.3695 × $20.00) + $11.5220=$58.9120 |
$22.00 |
|
$ |
62.7032 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
62.70 |
|
2.3695 shares + $10.5742 |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $22.00) =$62.7032 |
|
$ |
62.7032 |
|
(2.3695 × $22.00) + 10.5742 =$62.7032 |
$24.00 |
|
$ |
66.4944 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
66.4944 |
|
2.3695 shares + $9.6264 |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $24.00) =$66.4944 |
|
$ |
66.4944 |
|
(2.3695 × $24.00) + 9.6264 =$66.4944 |
$25.00 |
|
$ |
68.3900 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
68.39 |
|
2.3695 shares + $9.1525 |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $25.00) =$68.3900 |
|
$ |
68.3900 |
|
(2.3695 × $25.00) + $9.1525 =$68.3900 |
$26.00 |
|
$ |
70.2856 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
70.2856 |
|
2.3695 shares + $8.6786 |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $26.00) =$70.2856 |
|
$ |
70.2856 |
|
(2.3695 × $26.00) + $8.6786 =$70.2856 |
$28.00 |
|
$ |
74.0768 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
74.0768 |
|
2.3695 shares + $7.7308 |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $28.00) =$74.0768 |
|
$ |
74.0768 |
|
(2.3695 × $28.00) + $7.7308 =$74.0768 |
$30.00 |
|
$ |
77.8680 |
|
Consideration received |
|
$21.00 + 1.8956 shares |
|
$ |
77.8680 |
|
2.3695 shares + $6.7830 |
|
|
|
|
|
Value of the consideration received |
|
$21.00 + (1.8956 × $30.00) =$77.8680 |
|
$ |
77.8680 |
|
(2.3695 × $30.00) + 6.7830 =$77.8680 |
Other Aspects of the Exchange Offer
We are making the exchange offer in order to acquire at least majority control of, and ultimately the entire equity interest in, CB Bancshares. The exchange offer is the first step in our acquisition of CB Bancshares and is intended to facilitate the acquisition of all shares of CB Bancshares common stock. We intend, as soon as possible after completion of the exchange offer, to seek to have CB
34
Bancshares merge with CPF or a wholly owned subsidiary of CPF. The purpose of the CB Bancshares merger would be to acquire all shares of CB Bancshares common stock not exchanged in the exchange offer. In the CB Bancshares merger, each outstanding share of CB Bancshares common stock (except for treasury shares of CB Bancshares and shares beneficially owned directly or indirectly by us for our own account (except for shares held by CPF in a fiduciary capacity)) would be converted into the right to receive the acquisition consideration offered in the exchange offer, subject to dissenters' rights under Hawaii law and subject to proration. If we obtain all of the shares of CB Bancshares pursuant to our offer, former shareholders in CB Bancshares would own approximately % of the shares of common stock of CPF, based upon the number of shares outstanding of CPF and CB Bancshares on April , 2003 and March 4, 2003, respectively.
Our obligation to exchange the acquisition consideration for shares of CB Bancshares common stock pursuant to the exchange offer is subject to the conditions referred to under —"Conditions to the Exchange Offer" beginning on page 48.
CB Bancshares shareholders who tender shares of CB Bancshares common stock pursuant to the exchange offer will not be obligated to pay any charges or expenses of the exchange agent or any brokerage commissions. Transfer taxes on the exchange of CB Bancshares common stock pursuant to our exchange offer will be paid by us or on our behalf unless we disclose otherwise in the instructions to the letters of transmittal when provided.
On April 16, 2003, we asked CB Bancshares for its shareholder list and security position listings in order to communicate with shareholders and to distribute the exchange offer to the CB Bancshares shareholders. We received the list and listings on April 21, 2003.
Our offer to acquire CB Bancshares common stock is also an offer to acquire CB Bancshares preferred share purchase rights ("Rights"), and, when we refer to the shares of CB Bancshares common stock, we are also referring to the associated rights, unless we indicate otherwise. In addition, all references to the rights include the benefits to holders of those rights pursuant to the Rights agreement (the "Rights Agreement"), including the right to receive any payment due upon redemption of those rights.
You must tender one Right for each CB Bancshares share tendered in order to effect a valid tender of CB Bancshares common stock, unless the Rights have been redeemed. The Rights are currently represented by the certificates for the CB Bancshares common stock and your tender of CB Bancshares common stock prior to the Distribution Date will also constitute a tender of the associated Rights. We will not make a separate payment to you for the Rights. Upon the earlier to occur of (a) the close of business 20 days following a public announcement that a person or group of associated or affiliated persons other than CB Bancshares (an "Acquiring Person"), has acquired or generally accrued the right to acquire beneficial ownership of 20% or more of the outstanding CB Banschares shares or (b) 20 days (or a later date as may be determined by the CB Bancshares board of directors, prior to the time that any person becomes an Acquiring Person) following the commencement of a tender offer or exchange offer, upon consummation of which such person or group would be the beneficial owner of 30% or more of such outstanding CB Bancshares common stock (we refer to the earliest of these dates as the "Distribution Date"), separate certificates representing the Rights will be mailed to holders of record of CB Bancshares common stock as soon as practicable after the Distribution Date, and those separate Rights certificates alone will evidence the Rights. The Distribution Date is scheduled to occur on , 2003, which was the twentieth day following the commencement our exchange offer.
If the Distribution Date occurs and CB Bancshares or the related rights agent distributes separate certificates representing the Rights to you prior to the time that you tender your CB Bancshares common stock pursuant to our offer, certificates representing a number of Rights equal to the number of CB Bancshares common stock tendered must be delivered to the exchange agent, or, if available, a
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book-entry confirmation received by the exchange agent with respect thereto, in order for those CB Bancshares common stock to be validly tendered. If the Distribution Date occurs and separate certificates representing the Rights are not distributed prior to the time CB Bancshares common stock are tendered pursuant to our offer, Rights may be tendered prior to the time that you receive the certificates for Rights by use of the guaranteed delivery procedure described under "Procedure for Tendering" below.
Timing of the Exchange Offer
Our exchange offer is scheduled to expire at 12:00 midnight, New York City time, on , 2003. For more information, you should read the discussion below under the caption "—Extension, Termination and Amendment."
The term "expiration date" means 12:00 midnight, New York City time, on , 2003, unless we extend the period of time for which the exchange offer is open, in which case the term "expiration date" means the latest time and date on which the exchange offer, as so extended, expires.
Extension, Termination and Amendment
We expressly reserve theabsolute right, in our sole discretion at any time or from time to time, to extend the period of time during which the exchange offer remains open, and we can do so by giving oral or written notice of that extension to the exchange agent. We can give you no assurance that we will exercise our right to extend the exchange offer, although currently we intend to do so until all conditions have been satisfied or, where permissible, waived. During any extension, all shares of CB Bancshares common stock previously tendered and not withdrawn will remain subject to the exchange offer, subjectapplicable law, to each shareholder's right to withdraw hiswaive or her shares of CB Bancshares common stock. You should read the discussion under the caption "—Withdrawal Rights" on page 38 for more details.
Subject to the SEC's applicable rules and regulations, we also reserve the right, in our sole discretion, at any time or from time to time:
•to delay acceptance for exchange or the exchange of any shares of CB Bancshares common stock pursuant to the exchange offer, or to terminate the exchange offer and not accept for exchange or exchange any shares of CB Bancshares common stock not previously accepted for exchange or exchanged, upon the failure ofamend any of the conditions of the exchange offer to be satisfied prior to the expiration date; and
•- or to waive any
condition (other than the regulatory condition, thedefects, irregularities or conditions relatingof tender as to the absence of an injunction and the effectiveness of the registration statement for the CPF shares to be issued in the exchange offer)any particular Old Notes, either before or otherwise amend the offer to exchange in any respect, by giving oral or written notice of such delay, termination or amendment to the exchange agent and by making a public announcement.
We will follow any extension, termination, amendment or delay, as promptly as practicable, with a public announcement. In the case of an extension, the related announcement will be issued no later than 9:00 A.M., New York City time, on the next business day after the previously scheduled expiration date. Subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the Exchange Act, which require that any material change in the information published, sent or given to CB Bancshares shareholders in connection with the exchange offer be promptly sent to shareholders in a manner reasonably designed to inform shareholders of that change) and without limiting the manner in which we may choose to make any public announcement, we assume no obligation to publish, advertise or otherwise communicate any public announcement (i) of the type described in this paragraph or (ii) related to an election to provide a subsequent offering period, as explained below, other than by
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issuing a press release to the Dow Jones News Service, PR Newswire or some other similar national news service.
If we make a material change in the terms of the exchange offer or the information concerning the exchange offer, or if we waive a material condition of the exchange offer, we will extend the exchange offer to the extent required under the Exchange Act. If, prior to the expiration date, we change the percentage of shares of CB Bancshares common stock sought in the exchange or the consideration offered to CB Bancshares shareholders, that change will apply to all holders whose shares of CB Bancshares common stock are accepted for exchange pursuant to the exchange offer whether or not these shares of CB Bancshares common stock were accepted for exchange prior to the change. If at the time notice of such a change is first published, sent or given to CB Bancshares shareholders, the exchange offer is scheduled to expire at any time earlier than the tenth business day from and including the date that the related notice is first so published, sent or given, we will extend the offer to exchange until the expiration of that ten business-day period. For purposes of the exchange offer, a business day means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 A.M. through 12:00 midnight, New York City time.
We may elect to provide a subsequent offering period of not less than 3 nor more than twenty business days after the acceptance of shares of CB Bancshares common stock pursuant to our exchange offer if the requirements under Exchange Act Rule 14d-11 have been met. If we elect to provide a subsequent offering period, we will publicly announce the results of the exchange offer, including the approximate number of shares tendered and the percentage of CB Bancshares total shares outstanding that have been deposited to date, no later than 9:00 a.m., New York City time on the next business day after the expiration date. Our interpretation of the initial offering period and will immediately begin the subsequent offering period. CB Bancshares shareholders will not have the right to withdraw shares of CB Bancshares common stock that they tender in the subsequent offering period, if any.
If CB Bancshares agrees upon a negotiated merger with us, we may amend or terminate the exchange offer without purchasing any shares of CB Bancshares common stock.
Exchange of CB Bancshares Shares; Delivery of CPF Common Stock
Upon the terms and subject to the conditions of the exchange offer (including, if the exchange offer is extended or amended, the terms and conditions of any extension or amendment), we will accept, and will exchange, shares of CB Bancshares common stock validly tendered and not properly withdrawn promptly after the expiration date and promptly after they are tendered during any subsequent offering period. In all cases, exchange of shares of CB Bancshares common stock tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of:
•certificates for those shares of CB Bancshares common stock (or a confirmation of a book-entry transfer of those shares of CB Bancshares common stock in the exchange agent's account at The Depository Trust Company, or DTC);
•a properly completed and duly executed letter of transmittal or a manually signed facsimile of that document; and
•any other required documents.
For purposes of the exchange offer, we will be deemed to have accepted for exchange shares of CB Bancshares common stock validly tendered and not withdrawn if and when we notify the exchange agent of our acceptance for exchange of those shares of CB Bancshares common stock pursuant to the exchange offer. As soon as practicable after receipt of that notice, the exchange agent will deliver the acquisition consideration to CB Bancshares' shareholders who tendered CB Bancshares common stock. The exchange agent will act as agent for tendering CB Bancshares shareholders for the purpose of
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receiving from us the CPF common stock component and the cash component of the acquisition consideration (including cash to be paid in lieu of fractional shares of CPF common stock) and transmitting the acquisition consideration, if any, to such shareholders. You will not receive any interest on any cash that we pay you regardless of any delay in making the exchange.
If we do not accept any tendered shares of CB Bancshares common stock for exchange pursuant to the terms and conditions of the exchange offer for(including the instructions in the accompanying letter of transmittal) will be final and binding on all parties. No alternative, conditional or contingent tenders will be accepted. Unless waived, any reason,defects or if certificates are submitted for more sharesirregularities in connection with tenders of CB Bancshares common stock than are tendered,Old Notes must be cured within a time period we will return certificatesreasonably determine. We are not required to waive defects and are not required to notify you of defects in your tender. Although we intend to request the exchange agent to notify holders of defects or irregularities relating to tenders and withdrawals of Old Notes, neither we, the exchange agent nor any other person will have any duty or incur any liability for failure to give such sharesnotification. Tenders of CB Bancshares common stockOld Notes will not be considered to have been made until such defects or irregularities have been cured or waived. If we waive any terms or conditions with respect to a noteholder, we will extend the same waiver to all noteholders with respect to that term or condition. Any Old Notes received by the exchange agent that are not validly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent, without expense, to the tendering shareholder. Inholders following the caseexpiration date. Each tendering holder, by delivery of sharesan agent’s message, waives any right to receive any notice of CB Bancshares common stock tendered by book-entry transferthe acceptance of those sharessuch tender.
