U.S. Bank sold in latest merger involving LV banks

Wednesday, Oct. 4, 2000 | 11:19 a.m.

SUN STAFF AND WIRE REPORTS

In Nevada

U.S. Bank was established in Nevada in 1992. It has 43 branches in the state, including 22 in Southern Nevada.

The bank is based in Minneapolis. It has $1.27 billion in deposits, 400 employees and 78 ATMs in Nevada. Ken Ladd serves as president of the bank in Nevada.

The company plans continued growth in the Las Vegas area, with an in-store branch in an Albertson's supermarket scheduled to open in November, two free-standing branches planned in early 2001 and two more in-store branches being negotiated for early 2001.

The bank has in-store branches in Albertson's and Raley's outlets.

MINNEAPOLIS -- Firstar Corp. is buying U.S. Bancorp for about $21 billion in stock in a deal that would create the nation's ninth largest banking company and extend the consolidation in the financial services business.

Customers of U.S. Bank, the operating name for U.S. Bancorp in Nevada, will see no major changes when the acquisition is completed, a Las Vegas-based bank executive said.

John Wilcox, senior vice president and retail sales manager for the bank in Nevada, said details of the consolidation are still emerging, but he said bank account numbers and branch policies are expected to stay the same. The company will retain the U.S. Bank name in Nevada and the headquarters will remain in Minneapolis.

The deal is not expected to cause layoffs or branch closures in Nevada because Firstar does not operate in Nevada, meaning there is no local overlap that must be trimmed.

"My message to everybody is look out the window and see if you see a Firstar branch out there," Wilcox said. "It's a very complimentary acquisition and there's very little overlap of Firstar and U.S. Bank."

Wilcox said the biggest benefit to customers will be their ability to use bank services in markets where Firstar is located. For Nevadans, the closest market will be Arizona, where Firstar has a retail presence and U.S. Bank had no branches.

Firstar is strongest in the Midwest and its services will be available to U.S. Bank customers who travel to Ohio, Wisconsin, Missouri, Kentucky, Illinois, Indiana, Iowa, Tennessee, Arkansas, Kansas and Minnesota.

For Nevadans, today's deal marks just the latest in a long list of mergers affecting every big bank in the state the past few years. NationsBank bought Bank of America and kept the B of A name, Norwest bought Wells Fargo and kept the Wells Fargo name and the new Wells Fargo is buying First Security. Earlier, Zions Bancorporation, the parent of Nevada State Bank, tried but failed to buy First Security.

And this is the second merger involving U.S. Bank in four years. In 1997, the company merged with First Bank Systems Inc., Minneapolis. At the time, U.S. Bank was based in Portland, Ore. The company headquarters was moved to First Bank's Minneapolis base, but the new operation kept the U.S. Bank name.

That deal was similar to the Firstar transaction in that First Bank had no operations in Nevada.

U.S. Bank entered the Nevada market in 1992 when it acquired nine branches that were divested by Bank of America and Security Pacific Bank when those two companies merged.

The company formed by the deal announced today would have more than $160 billion in assets and operations in 24 Western and Midwestern states from California to Ohio.

The deal is the largest in the financial services industry since last month's $35 billion merger pact between Chase Manhattan and J.P. Morgan.

The dealmaking is driven by the notion that economies of scale will improve efficiency and produce savings for their customers. Critics have argued the deals will reduce competition in the banking industry and drive financial services fees higher.

The merger is expected to cut expenses by $266 million a year before taxes. An expense-reduction program will eliminate redundant administrative and corporate support functions.

"It looks like a good deal strategically as it gets Firstar into the higher-growth markets," said ING Barings analyst Andrew Collins. "Still, investors are likely to hammer Firstar's stock because no one likes (the acquirer's seat). It's a big deal."

Firstar stock fell $3.25 or 15 percent in midday trading today. U.S. Bancorp stock rose 31 cents to $23.50. The Firstar-U.S. Bancorp deal has been approved by the boards of both companies and they expect it will be completed in the first quarter of 2001, subject to shareholder and regulatory approval.

The combined company will do business under the U.S. Bancorp name and be headquartered in Minneapolis, where U.S. Bancorp is currently based. Firstar is based in Milwaukee.

Under terms of the deal, Firstar will swap 1.265 of its shares for each share of U.S. Bancorp.

Based on Firstar's closing price Tuesday of $22.25 a share, that would make the deal worth $28.15 for each U.S. Bancorp share, 21 percent more than U.S. Bancorp's closing price Tuesday of $23.19. Both stocks trade on the New York Stock Exchange.

Jerry Grundhofer, president and chief executive of Firstar, will continue in those positions. His brother, John Grundhofer, chairman, president and chief executive of U.S. Bancorp, will serve as chairman until his planned retirement on Dec. 31, 2002.

"We are both devoted to high standards of customer service, and we have a lot of other strengths to offer each other in areas ranging from sales culture to information technology," John Grundhofer said.

"There's not a lot of sibling rivalry there," said the Collins, the analyst at ING Barings. "They are not your typical brothers." Firstar has about $74 billion in total assets, nearly 1,200 banking offices and more than 2,200 ATM locations across the country.

U.S. Bancorp has $86 billion in assets and operates approximately 1,000 banking offices in the Midwest and West.