COLUMBUS, Ohio — The $587 million Nationwide FCU has sent the first round of disclosure documents about its proposed merger with Nationwide Bank to its members. If they approve, the members will agree to effectively sell the credit union for $79 million to the new bank, a roughly 20% premium over the equity the CU reported in its March 31 call report.
In some ways the disclosure packet resembles those used by CUs, which are trying to convince their members to approve a charter change to a mutual bank, but the ways it differed were in some ways even more significant.
The similarities include scheduling. Like charter change votes where members will have to decide whether to change their charters to mutual banks there will be three mailings of the disclosure packet to members, 90, 60 and 30 days before the vote. But unlike the other charter change efforts, the CU will only include ballots, which members will use to vote on the matter with the 30-day notice.
Other charter change efforts send ballots with every notice, a practice many have criticized as an attempt to stampede members into making a decision, which they cannot retract. The NCUA's most recent proposed charter change disclosure regulations would mandate only sending the ballot with the 30-day notice, the agency agreeing with the critics.
Likewise, Nationwide's proposal contains a boxed statement from the NCUA. The statement reminds members that control of their accounts will pass to a bank and CU members will lose any ability to control their CU; that the effect of taxation may bring lower savings rates and higher loan rates, and the fact that the cost of the merger will be roughly $1.2 million.
That total amount is broken down as follows: ballot preparation, $2,100; printing, $65,000; postage, $110,000; mailing assembly, $13,000; inspector of elections, $4,000; membership awareness initiative, $215,000; independent valuation, $195,000; legal fees and expenses, $559,650; staff time, $0; and special meeting, $5,000.
But where the Nationwide statement differs is that the CU has decided not to try to rebut it with any "what your credit union wants you to know" statements and the agency's statement makes it clear that none of the CU directors or senior management will profit from the merger.
The disclosure packet also includes the full merger agreement between Nationwide and the bank, a document which is equivalent to the plan of conversion that NCUA recently cited Lafayette FCU for not including in its proposed disclosure packet.
This is not to say that Nationwide does not push its members to agree to the deal. The disclosure packet includes letters from CEO Paula Edwards, and chairman Robert Oakley. Both strongly urge passage of the merger, with Oakley in particular talking a bit more about how the CU and bank came to the $79 million premium.
The CU also told members that the CU will continue to exist should they vote down the proposed merger with Nationwide Bank, but it would face a future with many obstacles.
"Should members vote down the merger, it is more likely that the value of the credit union would decrease–not increase," the CU wrote in a Frequently Answered Questions document about the transaction.
"The credit union would be faced with the prospect of having to compete with Nationwide Bank for the same customers, while, at the same time, having to grapple with some significant and fairly immediate changes to the credit union's operations. These include the loss of NFCU's present premises, including ATM locations and our service centers, the loss of our name and the loss of access to services currently provided by Nationwide such as communications, data transfer and support, and switching from a single sponsor to a community-based or multiple employer group charter within a year," the CU added.
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