CHARLOTTE, N.C. -- Some of the air started leaking out of the story yesterday that NationsBank Corp. was considering making offer for New England's biggest bank company, Fleet Financial Group.
Although Charlotte-based NationsBank maintained its standard public position of refusing to comment on merger activity and market speculation, sources said the bank was quietly telling some people that there wasn't anything to get worked up about.
On Tuesday, investors chased shares of Fleet, spurred by comments by First Boston Corp. bank analyst Thomas Hanley that a merger between NationsBank andFleet was a possibility.
While some market watchers were skeptical, plenty of people seized on the news and pushed Providence, R.I.-based Fleet onto the New York Stock Exchange's most active trading list Tuesday.
Yesterday, though, Fleet's shares acted less like those of a courted company, rising just 25 cents, to close at $34.25.
NationsBank's shares also didn't behave like the stock of a company in ardent pursuit, rising 25 cents, to close at $49.125. Typically, shares of acquiring companies fall, as investors sell their holdings in an effort to avoid having the value of their stock diluted.
Yesterday, analysts said that not only was a NationsBank purchase of Fleet a legal nightmare, it was not consistent with what NationsBank has said it plans to do.
Certain legal hurdles "prevent any deal right now," said RichardStillinger, a bank analyst with Keefe Bruyette & Woods Inc. in New York. "But an acquisition of Fleet -- assuming it is feasible -- doesn't seem to be in accord with their strategy."
The main obstacle is a legal barrier called the Southeast regional banking compact, erected in the mid-1980s to keep bigger Northern banks from buying smaller Southern banks. Several Southeastern banks have since grown as big as their Northern brethren, but the barrier that kept other banks out now limits the expansion of Southeastern banks outside the region.
NationsBank's acquisition program also seems to have shifted gears during the last year, other analysts said. Although it did agree to buy Maryland's biggest bank company, MNC Financial Inc., recent acquisitions have either been to fill in gaps in its existing markets or to pick up nonbank assets.
Among the completed or planned acquisitions are most of the assets of Chrysler First Inc., a consumer finance company; Chicago Research and Trading Group Ltd., a financial trading firm; and certain financial assets of US West Inc., a communications company.
In the world of big-time bank mergers, a handful of legal experts are usually brought into the process fairly quickly. A check with several law firms found that the best-known bank mergers lawyers said they are not working on a deal.