The Federal Reserve Board yesterday approved the acquisition of MNC Financial Inc. by NationsBank Corp., the next-to-last regulatory hurdle to clear before the two companies can merge, possibly within the next month.
NationsBank, based in Charlotte, N.C., is the fifth-largest banking company in the country, with $124 billion in assets, and stands to claim fourth place by acquiring MNC, which has $17 billion in assets.
NationsBank has offered $1.4 billion, or $15.17 a share, in nearly equal parts stock and cash for MNC. In June, MNC's shareholders overwhelmingly approved the deal at what was likely the Baltimore company's last annual meeting.
NationsBank's stock closed up 12.5 cents, at $50.50 a share. MNC's stock was unchanged, at $14.75. News of the Fed approval came after the stock market closed.
Separately, NationsBank said yesterday that it filed a shelf registration with the Securities and Exchange Commission to issue up to $4 billion in corporate debt securities and preferred and common stock. It said the securities would be used for general corporate purposes.
With the Fed approval, the last foreseeable obstacle to the merger would be an antitrust challenge from the U.S. Justice Department. Justice has 30 days from the date of Fed approval to examine the deal, and the option to extend that examination period as it chooses.
But the Fed said in its 26-page order that the proposed combination "would not exceed the levels of market concentration contained in the Department of Justice Merger Guidelines" in any of the two banks' markets, except for Charlottesville and Orange County, Va. (MNC's subsidiary, Virginia Federal Savings Bank, is based in Richmond.)
NationsBank has agreed to "divest certain offices of sufficient size" in those markets. Neither the Fed order nor NationsBank officials said how many branches would be divested.
Barring a Justice Department objection, and given the record of NationsBank's past acquisitions, the MNC merger should be completed in about 30 days, according to NationsBank officials. That's how long it took after the Fed approved the 1991 merger of the former NCNB Corp. with Atlanta-based C&S;/Sovran Corp., which created NationsBank.
The Fed was unswayed by several letters of concern that community investment groups in Maryland and Virginia filed about the proposed merger.
"Based on a review of the entire record of performance," the Fed wrote, including recent Community Reinvestment Act examinations, "and NationsBank's progress in implementing its commitments, the Board believes that the efforts of NationsBank and MNC to help meet the credit needs of all segments of the communities . . . are consistent with approval."
The Virginia Coalition for Community Reinvestment sent a five-page letter in June asking the board to reject the merger because of NationsBank's alleged lack of concern for low-income communities.
The Maryland Alliance for Responsible Investment (MARI), a Baltimore-based coalition of non-profit organizations, also wrote to the Fed in June, but refrained from condemning the merger. Instead, it expressed concerns about "NationsBank's unwillingness to move toward signing a new community reinvestment agreement" to replace the one MARI negotiated with MNC several years ago.