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Southern banks to merge
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December 8, 1997: 9:36 a.m. ET
First American to acquire Deposit Guaranty for $2.7 billion in stock
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NEW YORK (CNNfn) - First American Corp. has agreed to acquire Deposit Guaranty Corp. of Jackson, Miss., for stock valued at approximately $2.7 billion, both companies said Monday.
The Nashville, Tenn., bank holding company will issue 1.17 shares for each share of Deposit Guaranty.
Press reports had indicated that another Tennessee bank, Union Planters Corp., was the leading contender for Deposit Guaranty, which has been soliciting bids since last week.
The transaction comes amid increasing consolidation in the banking industry, the latest being First Union Corp.'s $16.6 billion bid for CoreStates Financial Corp.
First American's bid is expected to receive tax-free status pending a ruling from the Internal Revenue Service and will be accounted for as a pooling of interests. The deal is expected to be neutral to earnings in 1998 and 6 percent accretive to First American's consensus earnings estimate in 1999.
If the benefit of earnings on excess capital were included in the earnings, the merger should, on a pro-forma basis, be accretive by 10 percent.
First American said it expects to incur restructuring and merger-related, pretax charges of approximately $102 million. Included in those costs is $15 million to fund a charitable foundation dedicated to supporting the communities Deposit Guaranty serves.
The combined company will have assets of approximately $17.4 billion, deposits of $13 billion and stockholders' equity of $1.5 billion.
It will operate in Tennessee, Mississippi, Louisiana, Arkansas, Virginia and Kentucky, and will be the fourth-largest financial services institution in the Mid-South region, based on total assets.
The transaction is expected to close in the second quarter of 1998, subject to regulatory and shareholder approvals.
Under the agreement, Dennis Bottorff will remain chairman and chief executive of First American. Howard McMillan Jr., currently president of Deposit Guaranty, will be chairman of the Deposit Guaranty operating units.
First American, with assets of $10.6 billion, is the parent company of First American National Bank. Deposit Guaranty, with assets of $6.8 billion, is parent of Deposit Guaranty National Bank.
-- from staff and wire reports
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