graphic
News > Deals
Midwest banks set merger
July 1, 1998: 1:43 p.m. ET

Star Banc of Cincinnati and Firstar of Milwaukee agree to $7.2B deal
graphic
graphic graphic
graphic
NEW YORK (CNNfn) - Star Banc Corp. of Cincinnati and Firstar Corp. of Milwaukee said Wednesday they have agreed to merge in a stock deal worth $7.2 billion, creating a banking company with 720 branches in the Midwest and Arizona.
     The merger will create the 21st-largest bank holding company in the United States, with assets of more than $38 billion and deposits of $28 billion.
     The combined company will be called Firstar Corp. but run by Star Banc Chief Executive Officer Jerry Grundhofer.
     The merger allows both companies to better compete with such rivals as Banc One Corp., which is merging with First Chicago NBD Corp. in a $30 billion deal, and Norwest Corp., which is merging with Wells Fargo & Co., also a $30 billion transaction.
     Grundhofer said the deal makes Firstar the fourth-largest banking company in the Midwest.
     "This places both companies at the plateau of the banking industry, whereas we probably couldn't get there by ourselves," he said. "We believe the companies competed well separately, but when you take the power of the two together, we have the ability to compete at a higher plateau."
     Firstar (FSR) shares took the news well, soaring 6-3/16 to 44-3/8 in midday trading. Star Banc (STB) shares were off 2-11/16 at 61-3/16.
     Under terms of the agreement, Firstar shareholders will receive 0.76 share of the combined company's common stock for each Firstar share held.
     Star Banc shareholders will get one share of the combined company's stock for each Star Banc share.
     Based on Star Banc's Tuesday closing price, the deal represents a price of $48.55 for each Firstar share.
     The combined company's corporate headquarters will be based in Milwaukee. Its consumer banking and lending operations will be based in Cincinnati.
     Roger Fitzsimonds, Firstar chairman and chief executive officer, will become chairman of the board of the new company.
     The new company's board of directors will be composed of 18 Star Banc representatives and 14 Firstar members.
     The combined company expects to take a $325 million restructuring charge for the transaction.
     Star Banc currently employs 5,000 people at its 328 branches in Ohio, Kentucky and Indiana. Firstar has 7,500 employees working out of its banks and correspondent networks in the upper Midwest, as well as Arizona and Florida.
     The companies said they don't expect to close any branches but do expect minimal job losses at both companies.
     Officials said they plan to minimize job loss through normal attrition, voluntary separation programs and transfers into other positions and locations.
     A Firstar spokesman said most of the cuts will come from administrative positions. A Star Banc spokesman said employees involved in contact with customers won't be affected.
     "When companies merge, customers must come first," Fitzsimonds said.
     Both companies' boards have approved the merger and expect the transaction to be completed by early 1999. Back to top
     -- by staff writer John Frederick Moore

  RELATED STORIES

Star Banc, Firstar said to be close to $5B deal - June 30, 1998

Star Banc joins buyout binge - April 10, 1998

  RELATED SITES

Star Banc

Firstar


Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney




graphic