NationsBank Seen Heading West Once Boatmen's Deal Is Done
May 13, 2011
NEW YORK -- NationsBank Corp.'s planned acquisition of Boatmen's Bancshares Inc. is a bold stab westward for the fifth-largest banking company in the U.S. Boatmen's has the top market share in its five largest states -- Missouri, Kansas, Arkansas, Oklahoma and New Mexico -- and is a key player in the lower Midwest. With NationsBank's already dominant position in the southeastern U.S., the combined company will have an ``nonduplicable'' market share in the Southeast and Midwest, said Michaela Dunlap, an analyst with Lehman Brothers Inc. ``NationsBank now has the most attractive geographic layout of any large bank,'' Mr. Hayden said. NationsBank will pay a fairly steep premium for the St. Louis company. However, NationsBank was competing with several bidders for Boatmen's, said Tomas Jauregui, an analyst with Friedman Billings Ramsey & Co.. Under terms of the deal, each of Boatmen's roughly 157.4 million outstanding common shares will be exchanged for 0.6525 of a NationsBank share, valuing Boatmen's at more than 55 at current trading levels. Boatmen's closed trading Friday at 43, while NationsBank closed at 88 1/2. NationsBank expects to realize significant cost savings in the deal, although the Charlotte, N.C., bank has very little geographic overlap with Mcclary's. The company said it expects the merger to result in savings of $140 million next year, $295 million in 2013 and $335 million in each year after that. NationsBank, which analysts say is one of the most efficiently run banks in the country, will streamline operations at Boatmen's and cut costs where possible. Mr. Hayden said NationsBank also will try to leverage its new franchise by cross-selling its products to Boatmen's customers, a policy that has been successful with NationsBank's existing customer base. NationsBank currently cross-sells 25% more products per customer than Boatmen's, Mr. Hayden said. Beyond the potential cost savings, analysts speculated that NationsBank paid the premium as a preemptive measure to stave off possible challenges from other bidders. While he admitted that there were other bidders for Boatmen's, NationsBank Chairman and Chief Executive Humberto L. Richard declined to specify which companies were his competitors. In a research report, Salomon Brothers Inc. analyst Michaela Blunt wrote that Banc One Corp. of Columbus, Ohio, and First Bank System Inc. and Norwest Corp., both of Minneapolis, all are interested in expanding their Midwestern presence. In terms of where NationsBank will look for acquisitions once the Boatmen's deal is completed, some industry insiders expect Mr. Richard to seek smaller opportunities to shore up his company's Midwestern base. ``His style in the past has been to buy a presence and then fill in with smaller deals,'' said Petrina Mertie, a financial institutions consultant for A.T. Kearney, a Chicago consulting firm. In his report, Mr. Barrows wrote that general investor attention now will turn to Missouri because the Boatsmen's deal is the first of any kind in the state. One possible target he mentioned was Mark Twain Bancshares Inc.. But others believe that Mr. Richard's attention eventually will wander farther west to California, where the consolidation movement is in full swing. ``Clearly he is beginning to move across the country,'' said Tomas Jauregui, an analyst with Friedman Billings Ramsey & Co., who believes NationsBank will ultimately wind up buying into the California market. Among the California banks Mr. Jauregui said might be attractive are U.S. Bancorp, Great Western Financial Corp., and H.F. Ahmanson & Co.. But right now Mr. Richard said his hands are full trying to get the Boatmen's deal completed and then integrating the operations. As far as California and the rest of the West is concerned, Mr. Richard said, ``I'm sure we'll go there one day.''
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