"The total number of shares that Cullen/Frost will receive and the total consideration paid ultimately will be determined based on the volume-weighted daily average price of its common stock during the repurchase program"
It is possible that they are getting a better price buying the GS block than if they bought in open market, if the "volume-weighted average price" is actually somewhere in the mid-upper 50s. Also, they are paying 3.6% fee, not the usual 6% underwriting fee, depending on what the ultimate price is, this might not be a bad deal. They're not increasing capital, just replacing common equity with the preferred, or they might have their eye on an acquisition target that they can buy with the purchased shares instead of issuing new common.
I see your points but it still seems awfully expensive to me. Plus they have plenty of cash just sitting there that could be used for a takeover. Maybe mgmnt just wanted to bump up the share price to they could cash out some of their options. Hate to be so cynical but having been playing this game for a good while one does get that way. Lets watch to see if there are any mgmnt cash outs.