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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
File by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/X/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ST. PAUL BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
KEEFE MANAGERS, INC.
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
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(4) Date Filed:
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[LETTERHEAD OF KEEFE MANAGERS, INC.]
January 11, 1999
To: Shareholders of St. Paul Bancorp, Inc.
From: Harry V. Keefe, Jr.
Re: St. Paul Bancorp, Inc.
Dear Fellow St. Paul Shareholders:
Throughout my fifty-year career as an investment manager, I
have never been shy about expressing my concerns to the management of any
company which I believed had adopted a misguided policy or which had ignored a
significant opportunity to enhance shareholder value. Unfortunately, I seem to
have hit a brick wall in my efforts to convince St. Paul management of the
wisdom of finding an acquiror for the Company.
To me, the idea is eminently sensible. Through a sale of the
Company, we eliminate the downside risk that St. Paul -- with its stagnant
operating earnings and meager return on equity -- will continue to flounder in a
world of increasing competition. At the same time, we provide the holders with
the opportunity to obtain a premium for their shares. Simple. Clean. Do-able.
We have waited patiently for the Company to improve its
profitability. It's not happening. SPBC's core earnings growth (i.e., pre-tax,
pre-provision earnings) has been just 1.16% over the past five years. Comparable
thrifts had median and average growth rates of 9.26% and 11.36% over the same
period. Thirty-one banks with assets between $5-$10 billion had an average
return on equity in the third quarter of 15.16%. For the last five years St.
Paul's best return was in 1993 when the Company earned just 12.8%. Based on the
results of the first three quarters in 1998, the Company will be lucky to earn
11% on its equity for the year. By any yardstick that is well below average.
Management seems to believe that it is entitled to another two
years to carry out its "strategic plan." The Chairman claims that SPBC should be
earning at the rate of 15% by the fourth quarter of the year 2000. He has
failed, however, to give us credible statistics of how he'll achieve that goal.
The way I see it, management wants the Company to remain independent so it can
repair the damage that it caused in the first place. Considering the risks
involved, No Thanks.
Management's strategic plan involves, in part, a move by the
Company into the highly risky areas of commercial banking and the wholesale
acquisition of mortgages. Very few savings
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St. Paul Shareholders
January 11, 1999
Page 2
institutions have successfully moved into commercial banking. My opinion of
management's plan: Not so simple, highly risky, not easily do-able.
The Company's position flies in the face of everything I have
learned in the past half century about maximizing returns and reducing risk. I
have therefore decided to take my case to a higher authority: namely, to you,
the shareholders, who are the true owners of the Company.
My firm, Keefe Managers, Inc. owns one million shares of St.
Paul common stock. In an effort to protect and enhance the value of those shares
- -- and the shares of all St. Paul holders -- I have presented a proposal for
inclusion in the Company's proxy statement for the annual meeting in May. The
proposal, in short, requests the Board to put the Company up for sale.
Apparently, some members of the press and the investment
community believe the idea has merit. I've enclosed articles from Crain's
Chicago Business and Business Week which you may find interesting.
I am not seeking your vote at this time. However, if you are
as incensed as I am about management's position and would like to see the
Company sold, I urge you to make your voice heard. The attached sheet contains
the names, addresses and phone numbers of various members of the Company's
management and board. I believe it would be in your own best interests to
contact any of the individuals listed and to let them know that the Company's
owners are not willing to accept the status quo.
YOU CAN'T SEE THE FUTURE THROUGH
THE REAR-VIEW MIRROR
The industry consolidation that began over a decade ago still
continues, and the large, aggressive and well-run national and international
institutions will continue to gobble up market share and leverage their
economies of scale to make the competition ever tougher. Smaller,
community-oriented banks will survive only if they have established a clear
superiority in a given niche within the industry. I have not seen St. Paul
establish its superiority in any niche.
MORE COMPETITION IS COMING. BankOne, US Bancorp, Firstar, and
BankAmerica all are moving into the Chicago area and will be competing with St.
Paul, which is a tiny fraction of their size. These are ferocious competitors
who have tremendous financial resources and expertise, huge, high-powered
marketing organizations, significant advantages in economies of scale, as well
as technological superiority. In the near future St. Paul will find the Chicago
area a much more competitive and less friendly market.
All of these banks are focused on attracting new customers and
increasing their relationships with them many times over. Whether it is in
lending, savings, mortgages, credit cards, stock brokerage, mutual funds,
insurance, or any other financial-related service, the larger banks have become
quite good at the game of expanding customer relationships. My overriding fear
is that in most, if not all areas of banking, these larger companies will eat
St. Paul's lunch, and will eat into the value of our shares as well.
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St. Paul Shareholders
January 11, 1999
Page 3
When I presented my proposal to St. Paul, the Company
attempted to justify its current plans to stay independent by pointing to the
past performance of its stock price. I repeat: the past performance. Think about
what happens to a small or medium-sized discount chain in the retailing industry
- -- even one whose stock at some point over the past twenty-five years may have
outperformed the market -- once Wal-Mart moves into their neighborhood. Their
great returns become history. The future of the banking industry may be similar,
except there seems to be many more Wal-Marts in banking.
Your equity investment may continue even after the sale of St.
Paul. Many bank mergers are structured as tax free stock swaps. In our case, I
would hope that the board could arrange a transaction that would allow St. Paul
shareholders to exchange their shares at a premium for shares in the acquiring
company. Thus, you would still have an equity investment, but it would now be in
the acquiring company. And I trust that the board, with the proper investment
banking advice, would select a merger partner with considerable financial
strength as well as solid earnings and dividend growth.
WE MUST ACT SOON - WAITING INCREASES THE RISK
Right now, St. Paul is an attractive takeover candidate for
any number of larger banks. However, if its franchise erodes over the next few
years due to underperformance and tougher competition, it may no longer be so
attractive. That is why St. Paul must be sold now.
This is the first time in my career that I have presented a
shareholder proposal or led any kind of broad-based shareholder initiative. I
hope that fact alone conveys to you the importance that I attach to this
opportunity that we have with our mutual investment in St. Paul Bancorp.
I am pleased to lead the charge, but I still need your
support. I urge you to make your presence felt as an owner of the Company by
contacting a member of the Board or management and urging them to find a buyer
for the Company.
If you have any questions or would like to pass on any
comments, please call me at 212-754-2000.
I thank you for your help in seeking to make our investment a
stronger and better one.
Sincerely,
/s/ Harry V. Keefe, Jr.
Harry V. Keefe, Jr.
Attachments
* * *
Keefe Managers, Inc., led by Chairman Harry V. Keefe, Jr., is an investment
adviser/manager that focuses on financial stocks, and owns one million shares of
St. Paul Bancorp in its various funds. Harry Keefe, Jr. was the founder of
Keefe, Bruyette and Woods, an investment banking firm that services the banking
industry. He left Keefe, Bruyette and Woods in 1989 and founded Keefe Managers
in 1991.
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ST. PAUL BANCORP, INC. DIRECTORS
William A. Anderson Kenneth J. James
c/o St. Paul Bancorp, Inc. James Investment Company
6700 West North Ave. 1535 Lake Cook Road, Suite 302
Chicago, IL 60707 Northbrook, IL 60062
(773) 622-5000 (847) 564-7720
Patrick J. Agnew Jean C. Murray, O.P.
President & COO Dominican University
St. Paul Bancorp, Inc. 7900 West Division
6700 West North Ave. River Forest, IL 60305
Chicago, IL 60707 (708) 366-2490
(773) 622-5000
John W. Croghan Anthony R. Pasquinelli
Lincoln Capital Management Co. c/o Pasquinelli Construction Co.
200 South Wacker Drive, Suite 2100 905 West 175th Street, Suite 300
Chicago, IL 60606 Homewood, IL 60430
(312) 559-2880 (708) 957-9020
Alan J. Fredian Joseph C. Scully
c/o St. Paul Bancorp, Inc. Chairman of the Board & CEO
6700 West North Ave. St. Paul Bancorp, Inc.
Chicago, IL 60707 6700 West North Ave.
(773) 622-5000 Chicago, IL 60707
(773) 622-5000
Paul C. Gearen John J. Viera
Nicolson, Porter & List, Inc. c/o Illinois Housing Development Authority
1300 West Higgins Road, Suite 104 401 North Michigan Avenue, Suite 900
Park Ridge, IL 60068 Chicago, IL 60611
(847) 698-7400