UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
November 22, 2005
Via Facsimile (419) 241-6894 and U.S. Mail
Thomas C. Blank
Shumaker, Loop & Kendrick, LLP
1000 Jackson Street
Toledo, Ohio 43624
Re: Merchants Bancorp, Inc.
Schedule 13E-3/A filed November 2, 2005
File No. 5-80876
Revised Preliminary Proxy Statement on Schedule 14A filed
November 2, 2005
File No. 0-49771
Dear Mr. Blank:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your documents in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Schedule 14A
Summary Term Sheet, page 1
1. You note that shares of Series A Preferred Stock may be
transferred if the transfer does not increase the number of record
holders of that class of security. Briefly explain when a transfer
would not result in a greater number of record holders.
Amendment to Articles of Incorporation, page 2
2. We note that the Series A Preferred Stock has a finite term
that
will pay $23.00 per share on the 20th anniversary following the
date
of issuance. Please revise to more prominently disclose this term
of
the Series A Preferred Stock on your cover page and throughout
your
document. More specifically, in the body of your prospectus,
explain
why you have chosen to have the Series A Preferred stock "mature"
and
clearly explain that the $23.00 to be received by preferred stock
holders upon maturation may not be commensurate with the value of
the
preferred stock at that time.
3. See comment 1 above. Similarly, revise to more prominently
disclose on your cover page and throughout the proxy statement
that
the Series A Preferred Stock is callable after the fifth year
following issuance or in connection with a change in control.
Also,
revise to disclose the cash consideration that the security
holders
will receive.
Accounting Treatment, page 6
4. Please revise to disclose the accounting treatment of the
merger.
Also, we refer you to the disclosure that the reporting basis of
the
assets and liabilities will not change. Please reconcile this
statement with your pro forma financial statements filed under
Appendix E.
Special Factors, page 10
Background of the Merger Proposal, page 10
5. We note your disclosure that in 2004, Merchants retained Austin
Associates ("Austin") to assist it in developing a strategic plan
for
2005-2007. Please revise to more specifically disclose the date
that
Austin was retained. Also, provide a materially complete summary
of
the strategic plan that was proposed and later adopted by
Merchants
pursuant to Item 1015 of Regulation M-A. If Austin provided your
board with a written report or other materials regarding the
strategic plan, this report should be filed as an exhibit to your
Schedule 13E-3. See Item 1016(c) of Regulation M-A.
6. Please disclose the date that the board engaged Austin to
analyze
the financial impact and feasibility of going private. Also,
expand
your disclosure to discuss any actions taken by the company,
including management and the board, regarding a potential going
private transaction between the time that Austin was retained to
develop a strategic plan for the years 2005-2007 in 2004 and the
time
that the board engaged Austin to analyze the financial impact and
feasibility of going private.
7. Please disclose the primary reasons for going private as
presented
by Rick Maroney of Austin on February 23, 2005.
8. You disclose that Merchants contacted Austin to conduct an
analysis to determine a strategic plan and to analyze the
financial
impact and feasibility of going private. Did Merchants contact
Austin exclusively or did Merchants consider other financial
advisors? If not, please explain the rationale for not
considering
other financial advisors. See Item 1015(b) of Regulation M-A.
Certain Consequences of the Merger; Benefits and Detriments to
Affiliated and Non-Affiliated Shareholders, page 30
Negative factors for shareholders receiving Series A Preferred
Shares
in the Merger, page 33
9. You disclose that a negative factor for shareholders receiving
Series A Preferred Shares in the merger is that the securities
will
contain certain limits on transfer. Please reconcile this
statement
with your disclosure on page 3 that the preferred stock is freely
transferable insofar as it would not increase record ownership.
To
the extent that the "certain limits on transfer" refer to the
restriction that the transfer would not increase record ownership,
please clarify.
10. In addition to discussing the fact that preferred stockholders
will no longer have voting rights, also disclose that the holders
of
the Series A Preferred Stock will not have total control over the
disposal of the securities. Rather, you should discuss the
callability and the finite term of the Series A Preferred Stock as
negative factors.
Recommendation of our Board of Directors, page 34
11. We refer you to prior comment 30. We note your revised
disclosure that the board "relied considerably on the valuation
report and fairness opinion provided by Austin," however, it is
unclear whether the board has adopted the analysis of Austin in
arriving at its determination that the transaction is
substantively
fair. If true, please revise to specifically state that the board
adopted the analysis of Austin. If the Board did not adopt the
analysis of Austin, please revise to include a discussion of the
basis for the board`s fairness determinations including each of
the
factors in Instruction (2) to Item 1014 of Regulation M-A. In
this
regard, it does not appear that the board addresses the net book
value or the going concern value. If these factors were not
considered, or were considered but not deemed material in the
context
of this transaction, this in itself may be material to
stockholders`
understanding of the transaction. See Q&A 20 in SEC Release No.
34-
17719 (Apr. 13, 1981). Please revise to address these factors or
explain why they were not material in the context of this
transaction.
Source of Funds and Expenses, page 39
12. We note your response to prior comment 35 that you have
negotiated the terms of the credit line and that you will finalize
arrangements for financing immediately prior to filing your
definitive proxy statement. Please revise your disclosure to
identify the party that will supply the line of credit to
Merchants.
Also, revise to explain whether Merchants has received a letter of
intent from the lender and that you plan to finalize the
arrangements
prior to filing the definitive proxy statement. Further, disclose
whether you have any alternative financing plans or arrangements
in
the event that Merchants is unable to finalize its arrangements
prior
to the filing of your definitive proxy statement. See item
1007(b)
of Regulation M-A.
Closing
As appropriate, please amend your filing in response to these
comments. You may wish to provide us with marked copies of the
amendment to expedite our review. Please furnish a cover letter
with
your amendment that keys your responses to our comments and
provides
any requested supplemental information. Detailed cover letters
greatly facilitate our review. Please understand that we may have
additional comments after reviewing your amendment and responses
to
our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
You may contact me at (202) 551-3456 with any questions. In
my
absence, you may also contact Christina Chalk, Special Counsel, in
the Office of Mergers and Acquisitions, at (202) 551-3263.
Sincerely,
Jeffrey B. Werbitt
Attorney Advisor
Office of Mergers &
Acquisitions
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Thomas Blank, Esq.
November 22, 2005
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