EXHIBIT 99.1
[LOGO OF BAY VIEW CAPITAL CORPORATION] News Release
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NASDAQ SYMBOL: BVCC
Web Site: www.bayviewcapital.com
Contact: David A. Heaberlin
(650) 312-7272
NASDAQ SYMBOL: FMAX
Web Site: www.fmax.com
Contact: Franchise Mortgage Acceptance Company
Kevin T. Burke
(310) 229-2617
FOR IMMEDIATE RELEASE
March 11, 1999
BAY VIEW CAPITAL AND FRANCHISE MORTGAGE ACCEPTANCE
ANNOUNCE DEFINITIVE MERGER AGREEMENT
San Mateo, California - Bay View Capital Corporation (the "Company" or "Bay
View") and Franchise Mortgage Acceptance Company ("FMAC") today announced that
they have executed a Definitive Merger Agreement providing for the merger of
Southern California-based FMAC with the Company. FMAC is one of the nation's
leading small business lenders specializing in franchise concept loans. Bankers
Mutual ("Bankers"), a division of FMAC, is one of the nation's leading multi-
family lenders. Following the merger, FMAC will operate as a subsidiary of Bay
View Bank, N.A. ("BVB").
Edward H. Sondker, the Company's President and Chief Executive Officer,
commented, "FMAC provides Bay View with a significant small business platform
focused on the restaurant, energy and multi-family lending segments. The focus
of this merger, which is estimated to be accretive to earnings per share from
day one, is asset generation and revenue expansion as compared with cost
savings. We anticipate that FMAC, including Bankers, will originate in excess
of $2.8 billion in loans in the first year following the merger. This level of
asset production provides Bay View with significant future growth opportunities
and helps to resolve the challenge we have faced over the past year with the
high level of mortgage-related prepayments. While we intend to continue selling
Bankers' multi-family loan production through Fannie Mae and Freddie Mac, we do
intend to portfolio a portion of the commercial franchise loans originated,
resulting in an accelerated transformation of our balance sheet to higher-
yielding consumer and commercial assets."
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Wayne L. "Buz" Knyal, FMAC's President and Chief Executive Officer,
commented, "This merger significantly enhances our funding alternatives and
provides us with a powerful array of lending products to further solidify our
leadership position in the franchise and multi-family lending sectors."
Transaction Structure
In accordance with the terms of the Definitive Agreement, the Company will
acquire all of the common stock of FMAC for consideration currently valued at
approximately $309 million. Each share of FMAC common stock will be entitled to
receive, at the election of the holder, either $10.25 in cash, or .5125 shares
of the Company's common stock. The FMAC shareholder elections are subject to
the aggregate number of shares of FMAC common stock to be exchanged for the
Company's common stock being equal to 60% of the number of shares of FMAC common
stock outstanding immediately prior to closing the transaction and no FMAC
shareholder owning more than 9.9% of the Company's common stock, on a pro forma
basis.
The Definitive Agreement also provides for an additional payment of up to $30
million in connection with the earn-out provision of FMAC's April 1998 purchase
of Bankers.
Simultaneous with the merger, the Company will contribute substantially all
of the assets and liabilities of FMAC to a newly organized and wholly owned
subsidiary of BVB. The transaction is expected to close during the third
quarter of 1999, subject to approval by both the Company's and FMAC's
shareholders and subject to necessary regulatory approvals.
In connection with the merger, BVB will purchase approximately $400 million
in commercial loans from FMAC through the end of the first quarter of 1999. BVB
may also purchase additional levels of commercial loans through the closing date
of the transaction. This arrangement is expected to mitigate BVB's exposure to
loan prepayments during the first half of 1999.
David A. Heaberlin, the Company's Executive Vice President and Chief
Financial Officer, commented, "The accretive nature of this transaction is
consistent with the Company's mission of enhancing shareholder value. In
addition to providing the Company with national leaders in their respective
market niches, the transaction provides an estimated book EPS accretion of $0.15
per share, or 10%, in the first year following the merger and $1.13 per share,
or 65%, in the second year. Further, the tangible book value dilution associated
with the merger, resulting from the additional goodwill generated, is
anticipated to be recovered after only two years due to the significant levels
of tangible cash earnings generated."
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Profile of FMAC
FMAC is a commercial finance company originating and servicing loans to small
businesses, with a primary focus on established national and regional restaurant
franchise concepts and other branded concepts such as service stations and
convenience stores.
Since commencing business in 1991, FMAC has become a leading lender to
national and regional quick service restaurant franchisees and has developed a
growing presence in the casual dining sector. FMAC's focus also includes
financing retail energy licensees (e.g., service stations with multiple sources
of cash flows).
FMAC originates primarily long-term fixed-rate and variable-rate loans and
has traditionally sold such loans either through securitizations or whole loan
sales to institutional investors on a servicing retained basis. FMAC's loan
products are attractive investments to institutional investors because of the
credit profile of its borrowers, relatively long loan terms, call protection
through substantial prepayment penalties, and appropriate risk-adjusted yields.
FMAC originates loans and leases through 35 marketing offices in 20 states.
Since FMAC's inception in 1991 through December 31, 1998, it has funded
approximately $3.8 billion in loans and leases.
During 1998, FMAC formed a wholly owned insurance brokerage subsidiary, FMAC
Insurance Services, Inc., which offers property, casualty and employee benefits
policies and programs to businesses nationwide on an agency basis.
Profile of Bankers Mutual
FMAC acquired substantially all of the assets and liabilities of Bankers
Mutual and Bankers Mutual Mortgage, Inc. under an Asset Purchase Agreement
effective April 1, 1998.
Bankers, founded in 1980, originates multi-family income producing property
loans under programs with Fannie Mae and Freddie Mac. Bankers is one of a
select number of participating members of Fannie Mae's Delegated Underwriting
and Servicing ("DUS") program. During 1998, Bankers was the second largest
originator in Fannie Mae's DUS program nationally. Bankers also participates in
Freddie Mac's Program Plus seller-servicer program. During 1998, Bankers closed
over $1 billion in multi-family loans.
During 1998, FMAC, including Bankers, originated approximately $2.1 billion
in loans and leases and had a combined servicing portfolio, including loans and
leases classified as held-for-sale, of $5.4 billion. Currently, this portfolio
is approximately $6.0 billion.
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Management Team
FMAC and Bankers are collectively led by a team of executive officers with
extensive industry and professional experience. Wayne L. "Buz" Knyal, FMAC's
founder and a pioneer in franchise securitizations, is President and Chief
Executive Officer.
Trent D. Brooks, President, Bankers Mutual, has been with FMAC since its
acquisition of Bankers in April 1998. Previously, Mr. Brooks served as
President of Bankers Mutual and Bankers Mutual Mortgage, Inc., having joined
Bankers Mutual in 1984.
Donald W. Hakes serves as President of FMAC's Energy Finance Group, which
provides loans to national and regional businesses that distribute petroleum
products.
Thomas J. Schuldt serves as President of FMAC's Diversified Finance Group,
which includes the restaurant, golf and funeral lending divisions.
Kevin T. Burke, Executive Vice President, Capital Markets, is responsible for
FMAC's investing, financing and securitization activities.
Mr. Knyal and key managerial personnel are expected to remain with the
Company.
Asset Quality
FMAC's and Bankers' borrowers are generally either small business operators
or multi-family income producing property owners, with proven operating
experience and a history of generating positive operating cash flows. FMAC
relies primarily upon its assessment of enterprise value, based in part on
independent third-party valuations, and historical operating cash flows to make
credit determinations, as opposed to relying solely on the value of real estate
and other collateral.
Both FMAC and Bankers have outstanding credit histories as evidenced by their
de minimus level of combined credit losses, aggregating only approximately $2
million, over their eight-year and 20-year lives, respectively. The credit
quality of the portfolio is further evidenced by the low level of loan and lease
delinquencies at December 31, 1998, including serviced assets, as follows:
% of Loans
(Dollars in millions) Balance and Leases
------------------------------ ------- ----------
Loans and leases in servicing
portfolio $5,423 100.00%
30-59 days delinquent 9 0.16
60-89 days delinquent 2 0.04
90 days or more days delinquent 58 1.06
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Total delinquent $ 69 1.26%
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Financial Analysis
The transaction will be accounted for under the purchase method of accounting
and will generate goodwill currently estimated at approximately $235 million,
which the Company expects to amortize on a straight-line basis over a 15-year
period. As the transaction is structured as a tax-free reorganization, most of
the goodwill generated will be nondeductible for income tax purposes. Assuming
a full pay-out of the $30 million contingent payment in connection with FMAC's
acquisition of Bankers, approximately $68 million of this goodwill will retain
its deductibility for income tax purposes.
The price/earnings ("P/E") multiple for this transaction represents
approximately 10.5x FMAC's estimated 1999 earnings, as reported by First Call.
This P/E multiple includes the impact of the aforementioned $30 million
contingent payment in connection with FMAC's purchase of Bankers. This compares
with an average of 17.0x earnings for comparable commercial finance acquisitions
since 1996. The transaction price represents 2.27x FMAC's book value compared
with an average of 2.6x book value for comparable commercial finance
acquisitions since 1996.
The transaction is expected to be accretive on both a book and tangible cash
earnings per share ("EPS") basis. These projections include securitization gain
assumptions significantly below historically achieved levels, reflecting the
recent illiquidity in the securitization market. Securitization gains are
estimated at 2.7% of securitized assets. This compares with FMAC's actual cash
gains from securitizations of approximately 8% during 1997 and 1998, most of
which were executed prior to the market turbulence of last fall.
The following tables illustrate the estimated accretion during the first and
second years following the merger consummation. The accretive impact is
compared with the Company's consensus estimates assuming that the transaction
closed January 1, 1999.
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Year 1
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Book Tangible Cash
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First Call 1999 consensus estimate $1.53 $1.53
Cash basis adjustments:
Intangible amortization (including stock-
based compensation) - 0.53
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Forecasted before FMAC 1.53 2.06
Accretive impact of merger 0.15 0.43
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Forecasted after FMAC $1.68 $2.49
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Percentage accretion 10% 21%
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Year 2
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Book Tangible Cash
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First Call 2000 consensus estimate $1.74 $1.74
Cash basis adjustments:
Intangible amortization (including stock-
based compensation) - 0.53
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Forecasted before FMAC 1.74 2.27
Accretive impact of merger 1.13 1.42
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Forecasted after FMAC $2.87 $3.69
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Percentage accretion 65% 62%
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Other Considerations
The Definitive Agreement provides that FMAC must be Year 2000 compliant under
regulatory standards as a condition of closing.
A Voting Agreement has been executed with one of FMAC's significant
shareholders, representing approximately 38% of FMAC's outstanding common
shares, which provides that this shareholder may not sell its FMAC shares during
the term of the Definitive Agreement and will vote in favor of the merger.
In conjunction with the merger, Mr. Knyal will have an ownership interest in
the Company in excess of 5% and will hold a seat on the Company's Board of
Directors.
Financial and Legal Advisors
Lehman Brothers acted as financial advisors to the Company and Silver,
Freedman & Taff served as its legal counsel. CS First Boston acted as financial
advisors to FMAC and Dewey Ballantine LLP and Allen, Matkins, Leck, Gamble &
Mallory LLP served as its legal counsel.
BVCC Corporate Profile
Bay View Capital Corporation is a $5.6 billion diversified financial services
holding company headquartered in San Mateo, California. It is the parent
company of Bay View Bank, N.A. and its subsidiaries Bay View Acceptance
Corporation and Bay View Commercial Finance Group.
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Forward-Looking Statements
When used in this or future press releases, in the Company's filings with the
Securities and Exchange Commission or other public or shareholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "may", "estimates", "anticipates",
"would like", "will be", "will enable", "will enhance", "should be able",
"should allow", "to be able", "to ensure", "we expect", "we believe", or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The Company
wishes to caution readers not to place undue reliance on any such forward-
looking statements, which speak only as of the date made, and to advise readers
that various factors, including, but not limited to, regional and national
economic conditions; changes in the levels of market interest rates; credit
risks associated with real estate, consumer, commercial, and other lending
activities; competitive and regulatory factors; changes in accounting
principles; changes in the market value of the Company's common stock; the
Company's inability to achieve synergies in the FMAC, America First Eureka
Holdings, Inc., Ultra Funding, Inc., Bay View Commercial Finance Group, and Bay
View Credit acquisitions and to sustain or improve the performance of its
subsidiaries; the Company's inability to identify suitable future acquisition
candidates; and the Company's inability to achieve the assumptions as defined in
its strategic plans, including any assumptions related to both consummated and
contemplated acquisitions, could cause actual results to differ materially from
those projected. The Company does not undertake, and specifically disclaims any
obligations, to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
Non-GAAP Performance Measures
Non-GAAP performance measures contained in this press release, including
tangible cash earnings, are calculated excluding the amortization of intangible
assets. These measures are not measures of performance under generally accepted
accounting principles ("GAAP") and should not be considered an alternative to
net income as an indicator of the Company's operating performance. Such amounts
are included herein as management believes they are useful tools for investors
and analysts in assessing the Company's performance and trends excluding the
impact of such items. These measures may not be comparable to similarly titled
measures reported by other companies.
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