CHARLOTTE, N.C. — CHARLOTTE, N.C. - Wachovia Corp., the fourth-biggest U.S. bank, agreed yesterday to buy SouthTrust Corp. for $14.3 billion in stock to expand in nine states, including Florida, and speed its entry into Texas.
Wachovia said it will pay $41.83 in stock for each share of SouthTrust. The price is 3.1 times SouthTrust's book value, well above the 2.6 average in the five U.S. regional bank purchases of more than $3 billion since Jan. 1, 2002, Bloomberg data show.
Price called high
Buying SouthTrust of Birmingham, Ala., gives Wachovia Chief Executive Officer Kennedy Thompson, 53, a bank with $52.7 billion in assets and 731 branch-banking offices. The purchase also helps him compete with hometown rival Bank of America Corp. in North Carolina, Florida and Texas, but some investors said the price was too high.
"Ken Thompson has been public in his criticism of bank deals such as Bank of America and Fleet, saying he wouldn't pay that much for it," said William Cohen, who helps manage $7.1 billion for New York-based Equinox Capital Management, which holds about 4 million Wachovia shares. "Lo and behold, the deal has a premium similar to recent deals. They didn't live up to their words."
Shares of Wachovia, which had gained 10 percent in the past year, skidded $1.98, or 4.2 percent, to close at $45.02 yesterday on the New York Stock Exchange. SouthTrust's shares climbed $4.57, or 13 percent, to $39.37 on the Nasdaq stock market.
The acquisition spurred speculation that there would be more takeovers among regional banks, and the Standard & Poor's regional bank index, which includes SouthTrust, rose as much as 1.8 percent, the most in six weeks.
After the deal closes, the banks expect to cut $255 million in expenses and cut 4,300 jobs. That represents 3 percent of the companies' combined expenses. Acquisition costs were put at $431 million. The banks will close 130 to 150 consumer offices, mostly in Florida and Georgia.
Wachovia said the purchase would add to earnings within 24 months.
The combination will form a bank with about $267 billion in deposits, a customer base of 14 million households and businesses, 3,200 branches and 5,300 automated teller machines.
In February, Wachovia said it would open 250 offices in the next six years in Texas cities including Dallas, Fort Worth, Houston, Austin and San Antonio. SouthTrust has 70 offices in Texas and real estate set aside for another 25 to 30 locations, Thompson said. J.P. Morgan Chase & Co. and Bank of America are the biggest banks in Texas.
SouthTrust also adds to Wachovia's position in Florida, one of the fastest-growing U.S. markets. Wachovia said combining with SouthTrust will bring its deposits in the state to about $51 billion. Bank of America, the market leader, has about $53 billion there.
It will have the largest market share in North Carolina, Virginia, Georgia and South Carolina, and the second-largest market share in the District of Columbia, Alabama, Pennsylvania and New Jersey.
SouthTrust is led by Wallace Malone, chairman and chief executive officer since 1981, who will become vice chairman of the combined company. Two other members of SouthTrust's board will join the Wachovia board when the purchase is completed in the fourth quarter. Wachovia will continue to be based in Charlotte.