NationsBank to buy St. Louis regional $9.5 billion vTC acquisition of Boatmen's would make it No. 4 in U.S.


In its most expensive deal yet, NationsBank Corp. said yesterday that it will acquire St. Louis-based Boatmen's Bancshares Inc. in a transaction valued at $9.5 billion.

NationsBank expects to become the country's fourth largest banking company with $230 billion in assets. The Charlotte, N.C.-based company will have more than 13 million customers and offices in 16 states ranging from New Mexico to Maryland.

The transaction is expected to close in January, but it is subject to regulatory and shareholder approval.

Wall Street reacted by battering NationsBank's shares, while Boatmen's stock was surging.

NationsBank stock fell $7.375 a share to close at $85 yesterday. Boatmen's rose $10.3125, to close at $53.25 a share.

"By all measures, it is a very expensive transaction," said Reid Nagle, president and publisher of SNL Securities L.P., a Charlottesville, Va.-based banking and thrift research firm. "You throw that together with a potential for culture clash and that is what has the marketplace concerned."

NationsBank agreed to offer Boatmen's shareholders $61 a share, which is a 42 percent premium from Thursday's closing price of $42.9375.

Hugh L. McColl Jr., NationsBank's chairman and chief executive, said the combination of the companies "creates a new power in banking in North America."

"We believe what we have here is a perfect fit," McColl said at a press conference held in St. Louis. "What this combination creates is a banking company without parallel in the United States."

McColl said the Midwest's "stable economy provides a steady earnings platform for what I call the new NationsBank."

When the deal is completed, McColl will step down as chairman, but he will remain chief executive officer of NationsBank.

Andrew B. Craig III, chairman and chief executive of Boatmen's, will become chairman of NationsBank.

When asked why Craig would become chairman, McColl said, "This is a huge company. I would expect that the two of us will have plenty to do."

The best offer

Craig said Boatmen's, which has $41 billion in assets and operates in nine states, was approached by other companies, but NationsBank came in with the best offer.

"We are convinced this combination with NationsBank is the best option for our future," Craig said.

NationsBank expects to save $335 million in annual costs through 1999 by consolidating operations and business lines.

McColl didn't say how many of Boatmen's 20,000 employees would lose their jobs, but he said "natural attrition will provide room for some change in the work force."

The deal comes at a time when the pace of big bank mergers has fallen off dramatically since last year, when some of the largest mergers in the industry's history were announced, including the $13 billion Chemical Banking Corp.-Chase Manhattan Corp. merger.

NationsBank has made some smaller acquisitions this year, but its last big transaction was Bank South Corp. in Atlanta in January. NationsBank bought Baltimore's MNC Financial Inc. in 1993.

Some analysts surprised

The announcement caught some analysts by surprise.

"I never, never remotely thought St. Louis," said Merrill H. Ross, a banking analyst with Wheat First Butcher Singer, a Richmond, Va.-based brokerage firm.

She said the company has maintained that it would make acquisitions inside its primary business market.

Nevertheless, she thinks the deal will pay off for NationsBank.

"I think they had to be opportunistic; you don't get your best returns unless you leverage your equity, which is what they are doing," Ross said.

She criticized Wall Street's reaction to the announcement, especially in light of NationsBank's surge in profitability and its track record for making its acquisitions work.

"It is way overdone," said Ross, who has been recommending the stock. "They are building a franchise. They are leveraging their capital experience and management."

Benefits recognized

Most analysts thought Nations-Bank paid a hefty price for Boatmen's, but they said the deal should be beneficial in the longer term.

"Fortunately, we weren't recommending Nations," said David C. Stumpf, analyst with A. G. Edwards Inc. in St Louis. "They paid a lot but long term I think it will be a good fit."

Michael L. Mayo, an analyst with Lehman Brothers, said once the deal is completed "no other bank will be able to duplicate NationsBank's market share in their market."

NationsBank will reach 100 million people through more than 5,000 ATMs and about 2,600 banking offices.

The company will control 15 percent of the deposits across its franchise. In Maryland alone, NationsBank controls 16 percent of the state's deposits. It holds 15 percent of the deposits in Washington and 11 percent of the deposits in Virginia.

NationsBank's trust and asset management division will have $111 billion in assets under management, making it the sixth largest bank-owned operation in the country.

It will have $23 billion in proprietary mutual funds, and its mortgage servicing portfolio will stand at $110 billion.

McColl posed a question to himself during the press conference as the rationale for the Boatmen's transaction.

"Why now?" he said. "Opportunity."

Pub Date: 8/31/96

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