Main Street, Busey plan shareholder votes Feb. 28

CHAMPAIGN – Shareholders of First Busey Corp. and Main Street Trust Inc. will meet Feb. 28 in separate gatherings to vote on the proposed merger of the two bank holding companies.

Main Street shareholders will gather at the Champaign Country Club at 2:30 p.m. to consider the merger, and First Busey shareholders will meet at the same place 90 minutes later.

Under the proposed merger, Main Street stockholders would receive 1.55 shares of First Busey common stock for each share of Main Street stock they own. First Busey stockholders would keep their shares, since First Busey would be "the surviving entity."

The boards of directors of both companies are recommending approval. If shareholders concur, the companies hope to close the merger in the second quarter of this year.

But first they would need approval from the Federal Reserve and the Illinois Department of Financial and Professional Regulation.

If the Federal Reserve approves, the companies must wait 15 to 30 days for the U.S. Department of Justice to decide whether to challenge the merger on antitrust grounds.

Once the companies combine, they plan to merge their respective banks, Busey Bank and Main Street Bank & Trust. That merger, in turn, must win approval from the Federal Deposit Insurance Corp. and the Illinois Department of Financial and Professional Regulation.

The combined company would employ about 1,000 people and have more than 50 offices in central Illinois, Indianapolis and Florida.

The 150-page prospectus distributed to stockholders outlines many of the details released last September when the two companies publicly announced plans to merge.

Among the major points:

– The merger would create a company with more than $4 billion in assets. As of Sept. 30, 2006, First Busey had total assets of $2.4 billion, while Main Street Trust had total assets of $1.6 billion.

– Following the merger, First Busey Chairman Douglas C. Mills would become chairman of the new company until the 2009 annual meeting, at which point current Main Street Chairman Gregory Lykins is expected to succeed him.

– Main Street President and Chief Executive Officer Van Dukeman would become president and chief executive officer of the merged company. Lee O'Neill would become president and chief executive officer of Busey Bank.

– The new company would have four executive vice presidents: David B. White would be chief operating officer, Barbara J. Harrington would be chief financial officer, David D. Mills would oversee investor relations and Thomas M. Good would oversee risk management.

– The merged company's board of directors would have five representatives from First Busey and five representatives from Main Street Trust.

The five from First Busey would be: First Busey Chairman Douglas Mills; Joseph M. Ambrose, vice president of Horizon Hobby; David L. Ikenberry, University of Illinois professor of finance and department chairman; E. Phillips Knox, attorney with Tummelson, Bryan & Knox; and V.B. Leister Jr., chairman of Carter's Furniture.

The five from Main Street would be: Lykins; Dukeman; David J. Downey, president of The Downey Group; August C. Meyer Jr., president of Midwest Television; and George T. Shapland, president of Shapland Management Co.

The prospectus outlines employment agreements with First Busey employees Douglas Mills, Ed Scharlau, Barbara Harrington and David Mills and "letter agreements" with Main Street employees Lykins, Dukeman and White.

The prospectus points to some possible risk factors associated with the proposed merger.

Among them: Main Street stockholders will not be able to control a vote of the combined company's stockholders.

"After the merger, Main Street's stockholders will own less than a majority of the outstanding voting stock of the company and could therefore ... be outvoted by the existing and continuing First Busey stockholders if they all voted together as a group," the prospectus said. "First Busey stockholders will own about 58 percent of the outstanding voting stock."

The prospectus also warns shareholders that "uncertainties associated with the merger may cause a loss of employees and may otherwise affect the future business and operations of First Busey and Main Street."

The merger could result in the loss of key employees, the possible loss of customers in the event of forced divestitures and the possibility no cost savings may be realized, the report said.

But the prospectus also points out some of the advantages the companies could achieve as a result of merger.

In the case of Main Street, those advantages include "greater brand recognition" and the fact that the new company's stock would trade on the Nasdaq Global Select market rather than the over-the-counter bulletin board on which Main Street stock is now listed.

Trading on the Nasdaq would give Main Street stockholders increased liquidity for their shares, the report said.

The prospectus also provides a detailed history of how – and why – the proposed merger evolved.

According to the prospectus, Douglas Mills recommended in April 2004 that First Busey's board review all alternatives in the company's management succession plan that would relieve him of his responsibilities and authority as chief executive officer.

During 2004 and 2005, the First Busey board held several executive session meetings to review potential candidates for CEO. They sought people who shared Mills' vision and who were "best capable" of achieving Mills' goals while "maintaining the First Busey culture," the prospectus said.

In November 2005, Mills initiated an informal discussion with Lykins about the possibility of exploring a strategic transaction between First Busey and Main Street.

On March 29, 2006, "the First Busey board of directors responded favorably to the concept of a possible merger-of-equals transaction with Main Street." Such a merger would provide for "the best candidate, Mr. Dukeman ... to become the chief executive officer of First Busey," the prospectus said.

The boards of both companies met separately on Sept. 20, 2006, to consider the negotiated terms of the merger agreement. The merger agreement was signed later that day, and the transaction was publicly announced the morning of Sept. 21.

First Busey Corp. made one other recent filing with the Securities and Exchange Commission. On Feb. 1, it reported the 2007 cash compensation and 2006 cash bonus payments made to five executive officers.

The officers and their remuneration include: Douglas Mills, $225,000 plus a $100,000 bonus; O'Neill, $220,000 plus a $31,000 bonus; David Mills, $185,000 plus a $51,875 bonus; Scharlau, $180,000 plus a $33,750 bonus; and Harrington, $160,000 plus a $22,325 bonus. The bonuses relate to the company's goal for fiscal year 2006 earnings per share.

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