RULE 14A-103
NOTICE OF EXEMPT SOLICITATION
Information to be Included in Statements Submitted
by or on Behalf of a Person Pursuant to Rule 14a-6(g)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
NOTICE OF EXEMPT SOLICITATION
1. Name of the Registrant: St. Paul Bancorp, Inc.
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2. Name of person relying on exemption: Keefe Managers, Inc.
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3. Address of person relying on exemption: 375 Park Ave., New York, NY 10152
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4.Written Materials. Attach written materials required to be submitted
pursuant to Rule 14a-6(g)(1).
[LETTERHEAD OF KEEFE MANAGERS, INC.]
Harry V. Keefe, Jr.
Chairman, Chief Executive Officer
May 10, 1999
DEAR FELLOW ST. PAUL BANCORP SHAREHOLDERS:
Management has spoken. Their "strategic plan is working."
DO I BELIEVE IT? NOT FOR A MINUTE.
Why? Because once I cut through their first quarter numbers, I see the
same major problem that concerned me before - the lack of the kind of
customer-relationship driven growth that St. Paul must generate in order to
successfully compete in the toughening Chicago market.
Here's what I mean. St. Paul reported in their first quarter press release
that their $1 million net income increase (over the same quarter last year) was
due to "An increase in net interest income combined with lower general and
administrative expenses." What I see happening is this:
- Employee stock ownership plan canceled--saves $1.1 million
(interest cost) annually
- 90 people terminated--saves $3.5 million annually
- Officers' incentive bonus plan indefinitely canceled--saves
$3.0 million annually
- Executives' and directors' pension plans frozen--saves $1.3
million annually
All the above events come from last year's "restructuring charges" as
reported in the 1998 Company Annual Report (page 29).
I estimate the above "net interest income" and "general and administrative
expenses" events translate into a $1.5 million after tax impact on first quarter
net income. THAT IMPACT COMES OUT OF THE HIDES OF THE PEOPLE OPERATING THE
COMPANY, NOT FROM NEW BUSINESS GENERATED. IS THAT HOW WE MAKE OUR STRATEGIC PLAN
WORK?
I also note deposit growth stopping abruptly and Federal Home Loan Bank
BORROWING substituting for these traditional customer relationships. THAT IS NOT
CUSTOMER-RELATIONSHIP DRIVEN GROWTH, AND DOES NOT BUILD FRANCHISE VALUE.
Fellow shareholders, I strongly recommend that you support my proposal for
St. Paul to seek a sale or merger partner BEFORE FURTHER FRANCHISE VALUE IS
LOST. In my opinion, any strategic plan that is devoid of customer relationship
growth cannot succeed in the long run.
Don't be lulled into complacency by a stock price which I believe, and
other analysts believe, reflects TAKEOVER HOPE. Soundly defeat my proposal and,
I fear, OUR STOCK PRICE WILL SUFFER.
Sincerely,
/s/ Harry V. Keefe, Jr.
Harry V. Keefe, Jr.
P.S. I will be attending the annual meeting and look forward to meeting
as many of you as possible. If you need assistance in voting your shares for
my proposal, please call Beacon Hill Partners, Inc. at (800) 755-5001.
375 Park Avenue, New York, NY 10152 - (212) 754-2000 - FAX (212) 754-2005
CRAIN'S CHICAGO BUSINESS - DECEMBER 14, 1998
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OPINION
BY: ROBERT REED
WITH NO MIRACLE IN SIGHT, ST. PAUL SHOULD LOOK TO SELL
After investing your career in a single company, it's tough being
the one who puts the place on the selling block.
But like it or not, that's what Joseph Scully, veteran chairman and
CEO of St. Paul Bancorp Inc., ought to do with his savings bank.
Ultimately, a St. Paul sale would benefit his shareholders and
his employees, as well as the community that the $5.3-billion-assets
institution serves.
In short, it's time to let go, Joe.
Yet at a time when local financial institutions are being swallowed
like M&Ms by large buyers, Mr. Scully is determined to keep St. Paul from the
grasp of the nation's hungriest and richest acquirers.
He does so even as restless investors--especially feisty New York
money manager Harry Keefe--push Mr. Scully and his board of directors to start
fielding serious buyout bids.
Last week, Mr. Keefe, whose two hedge funds hold 3% or about 1
million, of St. Paul shares, said he will propose that the institution's
board hire an investment banker to explore the savings bank's options. (See
Late News.)
From his New York perch, Mr. Keefe sees something that Mr. Scully
does not--that the savings bank's choices increasingly boil down to these
options: stagnation, or selling while the franchise can still command a premium
price.
Already, there is a compelling case that St. Paul is lagging. Its
stock price floats in the $22 range, well above its 52-week low of $16.56, but
also well below its 52-week high of $27.12. Adding insult to injury for St. Paul
shareholders is the fact that this lender could command between $27 and $30 per
share if management opted to sell.
While profitable, St. Paul isn't setting any records. It has a 12%
return on equity (ROE), lower than the 17% benchmark for an average-performing
commercial bank, and lower than its own expectations.
St. Paul recently promised to hit a 15% ROE in 2000. To achieve that
goal, it's cutting costs by trimming worker benefits, including dumping an
employee stock ownership plan and suspending performance bonuses for management.
At the same time, St. Paul is moving into the wild world of
commercial banking, hoping to capitalize on the lending expertise it acquired
with the recent purchase of the much-smaller Beverly Bancorp Inc.
"That terrifies me," says Mr. Keefe, echoing the jittery view of
other investors and Wall Street types.
There's good reason to be nervous.
History has shown that disaster follows when thrifts or savings
banks, which specialize in making home mortgages, decide to go after commercial
bank credits.
Admittedly, St. Paul's management is nothing if not prudent. But
the lesson is that commercial lending is fraught with peril.
Good credits are more likely to be scarfed up by growing local
competitors like Bank One, BankAmerica and La Salle National Bank--all
"take-no-prisoner" companies intent on making things tough for a mid-sized,
second-tier institution like St. Paul.
In a way, you've got to admire Mr. Scully's competitive drive and
faith in his organization. Yet he should realize that turning over the reins to
a robust, more-ambitious acquirer is not giving up.
Accepting that revelation will require Mr. Scully to rethink his
long-held philosophy.
But he wouldn't be the first to do that, you know. After all, the
real St. Paul changed his beliefs during a fateful walk to Damascus.
(Used with permission)
The projections and/or valuation estimates of any analyst contained
in this article are only estimates. No one can guarantee a projected value, or a
premium contained in a projected value, and valuations arrived at by other
analysts may be higher or lower than the valuation presented. Further, these
projections, like those of every analyst, are subject to limitations such as
changes in the stock market in general, the market for thrift stocks in
particular, changes in interest rates, etc. Any of these factors could cause the
actual sale value to differ.