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Midwest banks in $10.6B deal
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April 30, 1999: 8:41 p.m. ET
Firstar, Mercantile to merge into Midwest banking powerhouse with $75B in assets
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NEW YORK (CNNfn) - Firstar Corp. announced late Friday it has agreed to buy fellow Mercantile Bancorp. for $10.6 billion in stock, creating the second-largest banking franchise in the Midwest.
Marking the latest in a consolidation wave in banking, Milwaukee-based Firstar said it will offer 2.091 shares of its stock for every share of Mercantile stock.
That comes at a premium of 29 percent from Thursday's close of Mercantile (MTL) stock. Shares of St. Louis-based Mercantile climbed 5-3/4 to 57, or more than 11 percent, on the New York Stock Exchange Friday. Firstar (FSR) fell 1-1/2 to 30-1/16.
The deal will create the nation's 13th-largest bank, with $75 billion in assets and more than 5 million customers in nine Midwest states plus Tennessee, Arkansas, and Arizona.
The deal, which is expected to close by the fourth quarter of 1999, will be accounted for as a pooling of interests. The banks expect the merger to boost earnings per share at Firstar by 8.5 percent this year and 10.7 percent in 2000.
Those improvements in earnings per share are expected to come through cost reductions. But the banks also said they expect pretax merger-related and restructuring charges of $428 million through the end of 2000.
Firstar and Mercantile estimate they will reduce expenses by $169 million, all in 2000.
Firstar's Fitzsimonds to retire
Thomas Jacobsen, Mercantile's chairman, president and chief executive officer, will take over as chairman of the board of the new bank -- and Jerry Grundhofer, Firstar president and chief executive officer, will keep those titles.
Firstar Chairman Roger Fitzsimonds plans to retire upon the closing of the acquisition.
The announcement comes less than a year after Firstar announced a $7.2 billion buyout of Cincinnati-based Star Banc.
"We are heartened by the speed and smoothness of the recent Star Banc-Firstar merger," Jacobsen said. "Combined with our own experience in post-transaction integration, it leads us to believe that together we can minimize near-term disruptions as we create our region's premier banking institution."
Boards of both companies have already approved the deal.
Firstar was advised by the CS First Boston; Donaldson, Lufkin & Jenrette was the financial advisor to Mercantile, with assistance also by Morgan Stanley Dean Witter.
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Firstar
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