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Virginia gets new top bank
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July 21, 1997: 9:42 a.m. ET
First Union of N.C. to acquire Signet for $3.25 billion, or $53.59 a share
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NEW YORK (CNNfn) - First Union Corp. plans to acquire Signet Banking Corp. for about $3.25 billion, ending a brief reign by Wachovia Corp. as Virginia's largest bank.
The transaction underscores the importance that competitors have placed on the booming Virginia market. Last month, Winston-Salem, N.C.-based Wachovia leapfrogged to the top position in the booming market with two acquisitions -- Central Fidelity Banks Inc. and Jefferson Bankshares Inc. -- valued at nearly $3 billion.
Analysts said the deal leaves Richmond, Va.-based Crestar Financial Corp. as the biggest remaining independent bank and the most likely target for consolidation.
The combined organization, which will operate under the First Union name and continue to be headquartered in Charlotte, N.C., will have about $155 billion in assets. In addition to ranking first in market share in Virginia, the combined company will rank second in market share in the mid-Atlantic region with 2.2 million customers in Virginia, Maryland and Washington.
"This merger creates a regional powerhouse with a shared strategic direction," said Malcolm S. McDonald, Signet's chairman and chief executive who will become First Union's chief executive of the Virginia, Maryland and Washington region following the completion of the deal.
In a statement, First Union said it agreed to exchange 0.55 shares of its common stock for each Signet share. Based on Friday's closing stock price of 97-7/16 on Friday, the deal values Signet stock at $53.59 -- a 46-percent premium to Friday closing stock price of 36-11/16.
The merger, which will be accounted for as a pooling of interests, is expected to close by year's end, pending Signet shareholder approval, regulatory approval and other customary conditions of closing.
Edward E. Crutchfield will remain chairman and chief executive of First Union. Benjamin P. Jenkins III, the current president of First Union's operations in the region, will become chief operating officer. First Union said Signet will get two seats on its board after the merger is completed.
First Union said it expects to take an after-tax merger restructuring charge of $135 million in 1997. The company also said it expects the merger will have a positive impact on earnings in 1998, and an increasingly positive impact on earnings in 1999 and beyond. These expectations are based on estimated savings of 50 percent of Signet's annual expenses, or $242 million, as well as incremental revenue growth of $37 million.
In connection with the execution of the merger agreement, Signet granted First Union an option to purchase, under certain circumstances, up to 19.9 percent of its stock.
At the completion of the merger, First Union will rescind its existing authorization to buy back stock, which authorized the repurchase of up to 25 million shares. First Union has repurchased about 11 million shares under that authorization.
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