Buenos Dias!

Glen Roney had been to Madrid once beforeu00e2u20ac”the guest of wealthy acquaintances who took him on a Spanish hunting expedition. On his visit in May 2006, however, Roney was the prey. Banco Bilbao Vizcaya Argentaria S.A.u00e2u20ac”Spainu00e2u20acu2122s largest financial institution and, with operations in 32 countries, one of Europeu00e2u20acu2122s global giantsu00e2u20ac”was eager to buy Texas Regional Bancshares Inc., the McAllen, Texas-based company that Roney founded and has run for 25 years. This meeting was the final push.

Since 2003, BBVA officials had gently courted Roney, convinced that Texas Regionalu00e2u20acu2122s south Texas footprint was an ideal fit for a company eager to leverage its connections in Mexico and build a dominant franchise in the Lone Star state. Although BBVA already had a Texas presenceu00e2u20ac”in 2005, it paid $850 million to acquire Laredo National Bancsharesu00e2u20ac”it wanted more. So a couple of times each year two men from BBVAu00e2u20acu2122s Madrid-based merger team would pay courtesy calls on Roney.

u00e2u20acu0153They were never high pressure, always very pleasant, and very cautious about what they said. But the gist of it was, they liked our bank, they liked our operation, and they thought weu00e2u20acu2122d be the ideal bank to be their Texas lead,u00e2u20ac recalls Roney, 76. u00e2u20acu0153Their goal was to build the number one bank in the state.u00e2u20ac

Roney held BBVA, and many other suitors, at armu00e2u20acu2122s length over those three yearsu00e2u20ac”and for good reason, because Texas Regional was prospering. The $7 billion holding company for Texas State Bank had seen its net income jump 15%, to $88.4 million, in 2005. Traditional metrics, such as returns on assets (1.42%) and equity (14.17%), were above average. And the board declared a 3-for-2 stock split in 2004, followed by a 10% stock dividend for shareholders in 2005. With a fast-growing economy creating plenty of demand for commercial loansu00e2u20ac”Texas Stateu00e2u20acu2122s forteu00e2u20ac”and competitors selling out to big out-of-towners, the future appeared bright.

Yet here was Roney in Madrid on this Monday morning, hammering out the details of a $2.2 billion deal that ranks as the biggest in Texas history, andu00e2u20ac”at 27.6 times Texas Regionalu00e2u20acu2122s earnings and 3.11 times its book valueu00e2u20ac”one of the richest anywhere. With an additional $1 per share thrown in for the right to negotiate exclusively, the all-cash transaction was priced at $38.90 per shareu00e2u20ac”nearly 30% more than the price on that day.

Itu00e2u20acu2122s a transaction that resonates on several different levels. To some, it speaks to a mad scramble for position in the Texas banking market. With few large, desirable banks remaining in the state, those left standing have tremendous u00e2u20acu0153scarcity valueu00e2u20ac for acquirers, says Craig McMahen, a managing director for New York-based Keefe Bruyette & Woods, who represented Texas Regional in the deal. u00e2u20acu0153If you have critical mass and are a well-run institution in metropolitan Texas, the multiples are very high.u00e2u20ac

To others, itu00e2u20acu2122s more about the willingness of big foreign banks to pay up for footholds in the U.S. In recent years, other European institutions, including the Royal Bank of Scotland and Franceu00e2u20acu2122s BNP Paribas, have acquired midsize franchises. u00e2u20acu0153The returns are so much better here, and the companies are so big, that paying a huge premium is nothing to them,u00e2u20ac says Anat Bird, a longtime banking industry executive and consultant, and CEO of SCB Forums, which operates peer group meetings for executives of midsize banks.

For BBVA, the deal offers some particularly powerful synergies. On the same day the Texas Regional acquisition was announced, the Spanish company also struck a deal for State National Bancshares Inc., a $1.7 billion bank based in Fort Worth, with offices in El Paso and New Mexico, as well. Combined with Laredo National, BBVA now boasts the fourth-largest banking operation in Texasu00e2u20ac”behind Bank of America Corp., Wells Fargo & Co., and JPMorgan Chase & Co.u00e2u20ac”with assets of $12.6 billion and 166 branches, most of them along the Mexican border.

BBVA officials envision creating a statewide powerhouse with the financial and product strength to compete with those bigger players. Josu00c3u00a9 Maria Garcia Meyer-Dohner, BBVA USAu00e2u20acu2122s chief executive, says the company wonu00e2u20acu2122t target Hispanics specifically. But Mexican nationals dominate its Texas markets, and BBVAu00e2u20acu2122s ownership of Bancomer, Mexicou00e2u20acu2122s largest banking group, offers cross-border opportunities in areas such as trade finance and remittances. u00e2u20acu0153We can take advantage of Bancomer on the other side of the border,u00e2u20ac he says.

As for Texas Regional? Ask Roney and his board members why they chose now to sell, and you get various responses. The regulatory environment had become harsher and costlier. Earnings growth was tougher to sustain as the company grew larger, and there was a sense, in the words of one director, that its share price had u00e2u20acu0153maxed out.u00e2u20ac Nor did it help that key members of management and the board, including Roney, were already well past traditional retirement age.

A deal with BBVA promised operational autonomy with more capital and products, and ensured that most managers and employees would keep their jobs. More than that, it offered the prospect of a market-beating premium, paid out in cold, hard cash.

Roney had entertained many would-be buyers over the past few years. He wonu00e2u20acu2122t name names, but says the list included most of the usual big-bank suspects that have expressed eagerness to expand in Texas. None had offered quite such a jackpot, however, and all wanted to use their stock as currency. BBVA was u00e2u20acu0153the only one who ever approached us and said theyu00e2u20acu2122d do a 100% cash deal,u00e2u20ac Roney says.

The decision wasnu00e2u20acu2122t made without regrets. u00e2u20acu0153I must confess that there were some tears shed when we did this. It was the right thing to do, but itu00e2u20acu2122s almost like giving up a child. You develop a real attachment to the place,u00e2u20ac says C. Kenneth Landrum, 76, a retired McAllen gynecologist who has been on the board since the company started in 1981. u00e2u20acu0153Iu00e2u20acu2122m sure Glen felt that way. This has been almost his whole life, running the bank.u00e2u20ac

For the newer directors, most of whom had joined Texas Rigionalu00e2u20acu2122s board after its acquisitions of other institutions, the big payout easily outweighed any sentimental misgivings. Director Mario Max Yzaguirre, president of Austin-based consulting firm Hunt-Mexico Inc. and Hunt Resources Investment Group, an investment bank, says his fondest Texas Regional memories center on the hundreds of local residents who would attend annual shareholder meetings.

The idea of providing them with a nice cash windfallu00e2u20ac”especially with todayu00e2u20acu2122s low 15% capital gains tax rateu00e2u20ac”was irresistible. As he deliberated, u00e2u20acu0153I could picture specific people, and knew that they were going to be very pleased with the transaction,u00e2u20ac says Yzaguirre, 46, a director since 2000.

In the end, thatu00e2u20acu2122s the way Roney chose to view it, as well. u00e2u20acu0153Once we weighed all the numbers, we concluded this was on the very, very top side of the market,u00e2u20ac he says. u00e2u20acu0153If youu00e2u20acu2122re looking out for the best interests of your shareholders, you have to take it.u00e2u20ac

Few institutions have reflected their leaderu00e2u20acu2122s persona quite as much as Roneyu00e2u20acu2122s Texas Regional. A colorful, bigger-than-life character, the burly south Texas native is known outside the company for his high energy level, work ethic, and strong management style. u00e2u20acu0153Heu00e2u20acu2122s a very strong, tight CEO who has run the company with an iron fist,u00e2u20ac says Bird, who counts Texas Regional as a client.

Directors donu00e2u20acu2122t dispute Roneyu00e2u20acu2122s sway over the board. The decision to sell, for instance, came only after he was convinced it was the proper course of action. But they also portray him as a chairman who sought consensus on important issues. u00e2u20acu0153Glen likes everything that comes from the board to be unanimous,u00e2u20ac says Landrum, who was chair of the audit committee. u00e2u20acu0153If there was something that an individual director was having heartburn over, we wouldnu00e2u20acu2122t do it until that uncertainty was resolved.u00e2u20ac

Over the past 40 years, Roney watched south Texas evolve from its small-town agriculture roots into a thriving hub of tourism and international commerce, his banku00e2u20acu2122s prospects rising and falling in step with the local economy. In the early 1980s, just before the Texas banking industry disintegrated amid a big oil bust, Roney, then chair and chief executive of McAllen State Bank, sold out to the old First City Bank in Houston and joined its board. u00e2u20acu0153We made a stock deal, and I thought I was fixed for life,u00e2u20ac Roney recalls.

Then came the collapse. First City stumbled at firstu00e2u20ac”u00e2u20acu0153I think I got one dividend check before things were cut off,u00e2u20ac he saysu00e2u20ac”and then, like so many other institutions, went into free fall. By 1984, u00e2u20acu0153I realized I was on a sinking ship, and if I was going to survive, Iu00e2u20acu2122d better get off,u00e2u20ac he adds.

Fortunately, he had an ace in the hole. Texas didnu00e2u20acu2122t allow branch banking back then, but in 1981 he had launched two u00e2u20acu0153affiliateu00e2u20ac banksu00e2u20ac”Texas State in McAllen and Harlingen National Bank in nearby Harlingen. The two managed to eke out profits during the banking crisis, and by 1985 Roney had taken over management of both. Soon, the laws changed to permit branch banking. The two institutions were merged into a holding company and Texas Regional was born, with Texas State as the flagship brand.

Texas Regional went public in 1994, and the goal, Roney says, was always simple: to be the top bank in the companyu00e2u20acu2122s markets. Texas State has long placed an emphasis on personal attention, answering the phone on the first ring, and building relationships by outhustling the competition. u00e2u20acu0153Iu00e2u20acu2122ve always preached to our people that thereu00e2u20acu2122s a bank on every corner, and that the only we have to set ourselves apart is service,u00e2u20ac Roney explains.

Judging by the numbers, the approach seems to have worked. According to Federal Deposit Insurance Corp. figures, at the end of last June, Texas State ranked first in market share in both the Brownsville-Harlingen and McAllen metropolitan statistical areas, with more than 24% of deposits in each.

Board members lent a serious hand in the effort. A diverse group that included investment bankers, oil industry experts, and real estate developers, Roney frequently leveraged their business connections and expertise to win business. It was a give-and-take relationship, but there was never any mistaking who was in charge. u00e2u20acu0153They always gave me quite a bit of leeway, but I always had high respect for them and kept them on top of whatever we were doing,u00e2u20ac Roney says.

Between 2002 and 2005, Texas Regional completed six deals, allocating both cash and stock to buy its way into new markets, including small deals in Dallas, Houston, and Corpus Christi. The company doubled in size during that time, and by 2006 had 74 branches.

With each transaction, Roney would cherry-pick a few well-connected directors, in the process crafting a high-powered board. A 2002 deal for Riverway Holdings Inc., a $693 million banking firm in Houston, for instance, brought two new members to the holding company board: Jack Mayfield Jr., chair of Goldston Oil Corp. and Riverwayu00e2u20acu2122s largest shareholder, and David Lane, chief financial officer of Wolff Cos., a Houston real estate development firm.

Similarly, a 2004 purchase of Southeast Texas Bancshares Inc. in Beaumont brought Joe Penland, president of Quality Mat Co., a maker of interlocking wooden mats, and Walter Umphrey, managing partner of Provost & Umphrey, a law firm that specializes in personal injury cases. u00e2u20acu0153These guys know the markets up there very well. They gave us an entru00c3u00a9e to new business and some important expertise,u00e2u20ac Roney says.

Many other board members of acquired institutions found homes either on the 25-member Texas State Bank board, or as advisory directors. In total, Texas Regional boasted 58 advisory directors when the BBVA deal was struck. u00e2u20acu0153All of these guys are strong financially, and theyu00e2u20acu2122ve got to bank somewhere,u00e2u20ac Roney says. u00e2u20acu0153My position has always been that Iu00e2u20acu2122d rather have them banking with me.u00e2u20ac

In retrospect, Landrum says, the deal for Southeast in 2004 began to tip the scales toward a sale. The transaction brought more investors who seemed eager to cash in on Texasu00e2u20acu2122s hot M&A market.

The truth was, even longer-term board members were beginning to see the writing on the wall. As Texas Regional had grown, some fretted about how to maintain the pace of returns in the face of rising shareholder expectations. u00e2u20acu0153As the company gets bigger, itu00e2u20acu2122s harder and harder to get that incremental growth for shareholders,u00e2u20ac says Yzaguirre.

Periodic reviews of the market and Texas Regionalu00e2u20acu2122s place in it reinforced the notion that it might be time to change course. u00e2u20acu0153From the figures we had seen, we felt the stock [priced in the upper $20s at the time] was pretty well maxed out,u00e2u20ac Landrum says. u00e2u20acu0153It was clear that we were either going to have to expand greatly ourselves or consider selling the bank to someone else.u00e2u20ac At least twice, the board explored merging with another Texas bank, he adds. u00e2u20acu0153But we would have been in the role of the secondary banku00e2u20ac”the other banks were largeru00e2u20ac”and we didnu00e2u20acu2122t have much interest in that.u00e2u20ac

Succession planning also was a concern. In his meetings with institutional investors and analysts, Roney had been hearing frequent questions about who was next in line to run the bank. The short answer was President Paul Moxley, though he was 61 years old. Beyond that, it was tough to say who was next on the organizational ladder. In recent years, several key managers had retired, u00e2u20acu0153and we found it wasnu00e2u20acu2122t easy to find competent people to take their place,u00e2u20ac Landrum says. u00e2u20acu0153There was a realization that Glen and many of the banku00e2u20acu2122s key people are getting up in years.u00e2u20ac

The true tipping point, however, might have come early in 2006, when Texas State got into a nasty squabble with the Federal Reserve Bank and state regulators over its anti-money-laundering compliance efforts. u00e2u20acu0153We didnu00e2u20acu2122t have any violations. It was more about the methodology we were using,u00e2u20ac Roney explains.

Even so, the resulting written agreement required the company to enhance customer identification procedures, enlist more outside auditing of its compliance functions, and dramatically increase staffing and training levels related to the Bank Secrecy Act. Throw in added costs for Sarbanes-Oxleyu00e2u20acu2122s 404 reporting requirement, and Roney figures u00e2u20acu0153we were spending maybe $3 million more on complianceu00e2u20ac in 2006 than a year earlier.

u00e2u20acu0153Many of us had become disgusted with having to spend a lot of money to implement these various government edicts,u00e2u20ac Landrum seethes. The compliance requirements amount to an u00e2u20acu0153unfunded mandate,u00e2u20ac he says, that u00e2u20acu0153doesnu00e2u20acu2122t raise money for our shareholders and has detracted from profitability.u00e2u20ac

Directors say the regulatory costs u00e2u20acu0153marginallyu00e2u20ac impacted their thought process on a potential sale. u00e2u20acu0153We started asking, u00e2u20acu02dcHow is all this going to affect our growth? How is it going to affect our margin?u00e2u20acu2122u00e2u20ac Roney recalls. u00e2u20acu0153Because it certainly will.u00e2u20ac

Against this backdrop, the persistence of BBVAu00e2u20acu2122s courtship began to carry more weight. While the Spaniards had never gotten into specific numbers in those earlier meetings, they had given Roney a good idea of what they were prepared to pay. Board members had been kept apprised of BBVAu00e2u20acu2122s visits, and now some began encouraging Roney to explore those overtures more closely.

So last February, when BBVA officials made one of those regular visits to McAllen, Roney maintained a good poker face, telling the officials he wasnu00e2u20acu2122t interested in a deal. But he also indicated that, perhaps, his mind could be changed if the price was right and certain u00e2u20acu0153socialu00e2u20ac conditions were met.

A couple of weeks later, Roney met with KBWu00e2u20acu2122s McMahen to discuss strategic optionsu00e2u20ac”including a possible sale. When the BBVA folks stopped by again in mid-April, Roney reiterated his commitment to independence, but also let on that heu00e2u20acu2122d been talking with investment bankers about the companyu00e2u20acu2122s future. While the Spaniards wonu00e2u20acu2122t say so, itu00e2u20acu2122s clear they sensed an opening and were ready to strike.

Six days later, on April 25, directors held their regularly scheduled board meeting. They then excused employees and anyone else without a direct say in a possible sale and met in executive session.

The gathering, also attended by William Rogers Jr., an Austin attorney and the companyu00e2u20acu2122s longtime outside corporate counsel, was short and to the point, but also monumental in its purpose. After years of doing deals and assessing various market scenarios with management, investment bankers, and each other, board members knew what they wanted out of a transaction, and were prepared to actively explore their options.

After a brief discussion, directors agreed to formally engage KBW, with the understanding that any sale would have to be on their terms: a large-premium deal that would safeguard the jobs of management and employees and leave decision making involving customers close to home. u00e2u20acu0153We didnu00e2u20acu2122t make a firm decision to sell at that time,u00e2u20ac Landrum says. u00e2u20acu0153But our instructions to Glen were to pursue it and see if we could get our most-important needs taken care of in a contract.u00e2u20ac

The ball was now officially rolling toward a sale. Within days, McMahen was contacting other potential acquirers to gauge interest. Roney, meanwhile, called BBVA officials directly to let them know the company was in play. Two days later, BBVA contacted McMahen with a proposal of their own: They were not only ready to make a u00e2u20acu0153very attractiveu00e2u20ac upfront offer, but were willing to sweeten the pot even more in exchange for exclusive negotiating rights.

On May 8, less than two weeks after the board had given its go ahead, directors met at a Hilton Hotel just a half-mile from Houstonu00e2u20acu2122s Hobby Airport. Secrecy had become a primary concern, and directors felt they couldnu00e2u20acu2122t risk holding a special meeting with outside advisers in the McAllen area.

u00e2u20acu0153We were going through the exploratory process, and we still might well have decided not to do anything,u00e2u20ac Yzaguirre explains. u00e2u20acu0153We didnu00e2u20acu2122t want people putting the pieces together. If rumors got out prematurely, it could disrupt the business and really cause harm to the franchise.u00e2u20ac

The proxy materials say the board carried out a full-scale strategic review at this meeting, weighing factors such as the operating environment for banks, Texas Regionalu00e2u20acu2122s future as an independent, and the like. But as is often the case, the idea of a sale had gained considerable momentum and realistically there was little to stop it. The mood, Landrum recalls, was one of u00e2u20acu0153jubilation. u00e2u20acu00a6 We were ready to sell.u00e2u20ac

The proceedings began with Rogers, the attorney, giving a formalistic, but necessary, overview of the boardu00e2u20acu2122s fiduciary duties. The review also covered their legal responsibilities to maintain the confidentiality of the process and temporary limitations on trading Texas Regional shares because of the potential for a big payout.

Then Roney and the investment bankers took over. The most significant matter up for consideration was whether to solicit more bids via an auction, or to enter private negotiations with BBVA, which had made what it considered its u00e2u20acu0153finalu00e2u20ac offer: $38 per-share in cash, with an additional $1 per share in exchange for the right to hold exclusive negotiations.

On the surface, it might seem that inviting multiple bids via an auction could drive up the price, but McMahen says thatu00e2u20acu2122s not always the case. Opening the books to a half a dozen or more rival institutions is fraught with risks. Some banks have been known to make a bid just to get a glimpse at confidential information, with little intention of actually buying. u00e2u20acu0153Some might argue that the franchise is less valuableu00e2u20ac after such outside scrutiny, McMahen says.

In the worst case, an auction can blow up in a banku00e2u20acu2122s face. While no one tracks the numbers of failed auctions, anecdotal evidence suggests that 2006 was a banner year for them, Bird says. An auction process is public and often carries inflated (and advertised) price expectations, creating dynamics that are similar to a hot housing market. If a deal isnu00e2u20acu2122t struck because no one offers enough, outsiders begin to wonder whatu00e2u20acu2122s wrong with the company. It can take years for the would-be seller to recover from the fallout.

Buyers, meanwhile, often are willing to pay more for the right to negotiate a deal behind closed doors, because they donu00e2u20acu2122t want to put the required time and effort into due diligence without the assurance that those efforts will be rewarded. A transaction the size of the Texas Regional acquisition demands u00e2u20acu0153hundreds and hundreds of executive man hours, and hundreds of thousands of dollars in legal and accounting expenses,u00e2u20ac McMahen says. u00e2u20acu0153If they know all of that money and effort is going to get them something, it makes it worthu00e2u20ac paying more upfront for a negotiated deal.

That appeared to be the case here. BBVAu00e2u20acu2122s offer was well above what any projections said the companyu00e2u20acu2122s stock could fetch on its own in the near future. Even so, to satisfy themselves on the dealu00e2u20acu2122s financial dynamics, board members benchmarked the transactionu00e2u20acu2122s proposed value against Zions Bancorp.u00e2u20acu2122s acquisition of Houston-based Amegy Bancorp, which closed in late 2005 and, until now, represented the high-water mark in deal valuations for a mid-size Texas bank.

The comparison was heartening: According to SNL Financial in Charlottesville, Virginia, BBVAu00e2u20acu2122s offer represented a higher P/E (27.6 versus 22.7), higher price-to-book (3.11 versus 2.73) and better deposit premium (37.9% versus 27.4%) than the Amegy deal.

BBVA also had indicated that it would keep the franchise pretty much as is, using Texas State and its management team as a platform for further in-state expansionu00e2u20ac”something that had emerged as perhaps the boardu00e2u20acu2122s key demand. u00e2u20acu0153Preservation of the workforce and managerial staff was one of our biggest concerns,u00e2u20ac Landrum explains. u00e2u20acu0153Weu00e2u20acu2122ve done pretty darn well the way we operate, and we didnu00e2u20acu2122t want someone coming in and forcing our customers to go through some office in New York for every question that came up on a loan.u00e2u20ac

To the BBVA people, this was a no-brainer: u00e2u20acu0153We donu00e2u20acu2122t have operations here. We were interested in the team,u00e2u20ac Garcia Meyer-Dohner says. u00e2u20acu0153The whole idea is to support these guys.u00e2u20ac

All of that argued for private negotiations. As they deliberated, McMahen gave his views on the pros and cons of each approach, and discussed what other buyers might be willing to realistically offeru00e2u20ac”and their conditionsu00e2u20ac”based on his conversations of the past two weeks. In the end, the investment bankeru00e2u20acu2122s recommendation carried the day. u00e2u20acu0153We listened to all of the analysis, looked at transactions of a comparable nature, and concluded [a negotiated deal] was the best way to proceed,u00e2u20ac Yzaguirre says. u00e2u20acu0153We got some very good external advice that made us comfortable with the decision.u00e2u20ac

Two weeks later, on a Saturday, Roney and director Hill Feinberg, chairman and CEO of First Southwest Holdings Inc., a Dallas investment bank, boarded a flight for Madrid, accompanied by McMahen and Rogers, the outside counsel. They arrived the following afternoon, and had dinner that evening with BBVA executives. Monday morning, the group went to BBVAu00e2u20acu2122s headquarters for more get-to-know-you conversations. Most of the talk centered on BBVA, including a detailed PowerPoint presentation covering its global operations and introductions to top managers. There were discussions with lenders, human resources and compliance people, and an overview of the big-picture strategy.

Among the things they learned: BBVA had grown from a Spanish domestic bank to global giant with a step-by-step strategy that built on its expertise and cultural connections. Through the 1980s and u00e2u20acu212290s, it had built a strong franchise in Latin America, then moved into Mexico with its acquisition of Bancomer. Now it was focusing on the U.S. marketu00e2u20ac”and was looking for a platform upon which to build a domestic retail bank.

Although the meetings were taking place in Spain, all of the discussions were in perfect English. Roney had two private meetings with BBVA Chairman and CEO Francisco Gonzalez. The topics were general in nature, meant more to find common ground than to negotiate. u00e2u20acu0153He had just come back from a meeting with Bill Gates and a lot of other business heavyweightsu00e2u20ac and shared some of those insights, Roney recalls. They also talked about Texas Regional. u00e2u20acu0153He wanted to expand in the U.S., and particularly in Texas, and wanted to get a deal done.u00e2u20ac

That night, the two sides bonded further over dinner at a small restaurant that featured cuisine from northern Spain. u00e2u20acu0153Itu00e2u20acu2122s a very impressive organization, headed up by some fairly young, energetic people,u00e2u20ac Roney says.

The next day was more about Texas Regional. Roney articulated u00e2u20acu0153a vision to create a Texas leader,u00e2u20ac recalls Garcia Meyer-Dohneru00e2u20ac”an idea that was enthusiastically received by the hosts. Later, Roney and Feinberg met with the number crunchers. The duo had gone to Madrid u00e2u20acu0153hoping to squeeze another nickel out of them for our shareholders,u00e2u20ac Roney says. But BBVA wouldnu00e2u20acu2122t budge. u00e2u20acu0153They said, u00e2u20acu02dcWeu00e2u20acu2122ve told you what we can do, and we want the deal very badly. But this is all we can do.u00e2u20acu2122u00e2u20ac Dinner that night was at an Andalusian restaurant, where some of the guests feasted on suckling pig.

Several times during the trip, Roney called home to bounce his impressions off of Landrum and Umphrey, the attorney on the board and the second-largest shareholder behind the CEO. u00e2u20acu0153Iu00e2u20acu2122d say, u00e2u20acu02dcAre you comfortable with where we are at here?u00e2u20acu2122u00e2u20ac Roney recalls. u00e2u20acu0153u00e2u20acu02dcWe think weu00e2u20acu2122re headed in the right direction. Do you agree?u00e2u20acu2122u00e2u20ac While Landrum was disappointed that Roney was unable to extract more money, he wasnu00e2u20acu2122t surprised. And in the end, it did not derail the deal. By the time Roney boarded the plane home Wednesday, he had an agreement in principle to sell Texas Regional.

Even as Roney was on his flight, executives at home were setting up a virtual data room for BBVA to conduct due diligence. Accessing loan documents online made the process much easier for a company with people spread around the globe. It also helped keep the deal under wraps, though a few days before it closed, word apparently leaked out, and the share price surged. During the last days, a BBVA team performed some on-site due diligence. Even though most of the work was done over the weekend, Landrum speculates that someone not involved in the deal u00e2u20acu0153saw all these Spaniards in our building and pieced things together.u00e2u20ac

The due diligence revealed a couple of dicey loans that BBVA was unhappy about. After a little negotiation, the price was reduced 10 cents, to $38.90 per-share, with a special 10-cent dividend offered if the loans could be worked out in time. u00e2u20acu0153We didnu00e2u20acu2122t collect on that dividend,u00e2u20ac Roney says, adding that the issue will eventually be resolved.

Late in the afternoon of Sunday, June 11, the board of Texas Regional gathered for a final time. The three-hour meeting, held at the companyu00e2u20acu2122s McAllen headquarters, included dinner and a bit of reminiscing. Most of them also learned for the first time about BBVAu00e2u20acu2122s State National deal. Roney had been told a week earlier that something was in the works, but didnu00e2u20acu2122t know the other companyu00e2u20acu2122s identity. Nor did it matter much to him. u00e2u20acu0153My feeling was, if they want to grow more in Texas, thatu00e2u20acu2122s a good thing,u00e2u20ac he says.

As directors reviewed the details of the proposed transaction one last time, a sense of accomplishment permeated the room. u00e2u20acu0153Youu00e2u20acu2122re familiar in theory with how something like this plays out. But until you actually make the decision, you donu00e2u20acu2122t have a sense for the weight of the responsibility,u00e2u20ac Yzaguirre says. u00e2u20acu0153Being able to say, u00e2u20acu02dcGosh, Iu00e2u20acu2122m so at ease with this decisionu00e2u20ac”so sure itu00e2u20acu2122s the right thing to dou00e2u20acu2122 was exhilarating.u00e2u20ac

Despite the upbeat mood, Roney didnu00e2u20acu2122t call for a vote. u00e2u20acu0153Glen wanted us to sleep on it one more night, and make sure all of our concerns were addressed,u00e2u20ac Landrum says. The next morning, the board held a brief meeting, cast its votes, and it was done. The deal was announced when the markets closed that afternoon. While there was some initial angst among customers and employees, u00e2u20acu0153as soon as they understood that things were going to stay pretty much like they have been, everyone was happy,u00e2u20ac Roney says.

In retrospect, McMahen calls the directorsu00e2u20acu2122 performance in the deal u00e2u20acu0153a textbook case of a board doing its job right. u00e2u20acu00a6 There was an opportunity, directors assessed the market environment and what it would mean for shareholders and customers, and made the right decision.u00e2u20ac

Today, Texas Regional is no more. But Roney remains Texas Stateu00e2u20acu2122s CEO and meets regularly with his boardu00e2u20ac”the group, for the time being, remains intactu00e2u20ac”and with his new bosses as they plot what comes next for BBVA in Texas. Youu00e2u20acu2122d think it would be a daunting setting, given the size of the new organization. u00e2u20acu0153For some reason, I donu00e2u20acu2122t feel at all intimidated,u00e2u20ac Roney says. u00e2u20acu0153I know more about commercial banking in Texas than they do. u00e2u20acu00a6 They bought us because they need us.u00e2u20ac In the end, all sides in this transaction appear to have gotten what they wanted.