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PHOENIX – Minneapolis-based Norwest Corp., an unsuccessful bidder for Great American Savings, has made no secret about its desire to expand its $2.2 billion asset base in Arizona.
And out-of-state banking giants such as San Francisco’s Wells Fargo & Co. and NationsBank in Charlotte, N.C., also are thought to be interested in establishing a presence in the state.
But with Banc One Corp.’s May 13 purchase of Great American’s 58-branch franchise, the options for acquiring a share of the Arizona market have become fewer and more costly. Banc One paid $49.36 million for Great American’s branches and $1.4 billion in deposits.
Outside of a piecemeal assemblage of a dozen small banks, the acquisition opportunities in Arizona have been narrowed to Caliber Bank and to First Interstate, via acquisition of its Los Angeles-based parent, First Interstate Bancorp.
While Caliber officers repeatedly say the bank is not for sale, speculation persists that the $1.8 billion-asset franchise is on the market. Sources say that at least Norwest has looked at Caliber and concluded the two franchises would mesh well.
First Interstate Bancorp hasn’t exactly hung out a for sale sign either.
Kristina Jelinski, a banking industry analyst with Dakin Securities in San Francisco, doubts First Interstate is for sale “per se.’ But, she added, “if the offer is good enough, anything is possible.’ And, the $50 billion-asset California bank holding company has its own acquisition strategy, Jelinski noted.
For example, this year First Interstate paid $102 million, or 2.11 times book value, for Chase Bank of Arizona’s $527 million-asset, nine-branch franchise. Jelinski noted First Interstate also has recently announced several acquisitions in California.
Along those lines, First Interstate could also be counted as a possible buyer for Caliber, assuming it is for sale.
First Interstate has long been speculated to be a takeover target. Speculation became more real in March when Wells Fargo & Co. apparently made an offer for the 14-state banking franchise.
While neither company would confirm the offer, it was widely speculated First Interstate had turned down a $90-per-share offer from Wells that would have made the value of the transaction approximately $7 billion. The transaction would have far exceeded the $4.5 billion BankAmerica Corp. paid for Security Pacific Corp. in the the early 1990s.
In the wake of Wells Fargo’s rejected offer, some analysts mentioned Norwest as a possible buyer for First Interstate, along with Columbus, Ohio’s Banc One Corp., parent of Phoenix-based Bank One Arizona.
An acquisition or merger between Banc One Corp. and First Interstate Bancorp could create potential antitrust concerns in Arizona, where the banks rank first and third respectively in deposits and assets. But there most likely wouldn’t be objections to a First Interstate-Norwest combination.
And such an amalgamation would go a long way toward improving the market share of both institutions.
Steve Schroll, who follows Norwest Corp. for Piper Jaffray Inc., a Minneapolis-based investment banking firm, thinks a merger or acquisition between First Interstate and Norwest is possible. But he noted such a transaction would have huge social as well as financial hurdles.
Schroll acknowledged First Interstate’s banking operations would complement Norwest’s franchises in the West and give it a banking presence on the West Coast. But he noted such an acquisition would be a big move for Norwest into the commercial banking business, a move that may run contrary to its present strategy to build its mortgage, consumer finance and other diversified businesses.
Schroll said Norwest has adequate capital and management depth, and unequaled experience operating a multistate banking franchise.
First Interstate’s rejection of Wells Fargo’s apparent $90 per share offer indicates that if the bank holding company has a price, it’s considerable. With First Interstate expected to earn roughly $8 per share, and with deals being done at 12 to 14 times earnings, some observers see a price of $96 to $112 per share as more appropriate.
A deal for Caliber would likely be more along the lines of First Interstate’s acquisition of Chase – a transaction at two to three times book value instead of a 3.7 percent premium on deposits.