First Interstate Lining Up Buyers for Parts of B of A

New York’s Citicorp and several other major U.S. and foreign banks have held talks with First Interstate Bancorp about the purchase of BankAmerica assets if First Interstate succeeds in its $3.4-billion bid to buy the troubled San Francisco banking company, industry sources said Tuesday.

Besides Citicorp, banks said to have approached First Interstate include New York’s Chase Manhattan; two Chicago institutions, Northern Trust Co. and First National Bank of Chicago, and several large banks in Japan, West Germany and Australia.

First Interstate declined to comment on the matter. The other banks either would not comment or could not be reached.

A Citicorp source, however, said First Interstate and Citicorp have discussed the quick sale of substantial BankAmerica assets to Citicorp if the First Interstate-BankAmerica merger goes through.

A source familiar with First Interstate’s strategy called the lining up of buyers for BankAmerica assets after a First Interstate-BankAmerica merger the “stalking horse scenario.” Under this approach, First Interstate would, in effect, lead a syndicate of banks, each with an interest in a piece or pieces of the San Francisco banking giant.

The plan has two immediate advantages for First Interstate: It would give the bank committed buyers for substantial BankAmerica assets to provide ready cash to fund the costly acquisition, and it would allow First Interstate to quickly get rid of overlapping units or lines of business in which it has no management expertise so that it can concentrate on joining the two large banking companies.

The Citicorp source said First Interstate would need to sell dozens of BankAmerica branches in California that overlap with First Interstate offices and that Citicorp would be a willing buyer, probably through its Citicorp Savings unit. Citicorp also would be interested in picking up BankAmerica corporate business throughout the United States and overseas operations to add to its own extensive foreign network.

The trade-off would be Citicorp’s assumption of a chunk of BankAmerica’s $5 billion in bad loans and foreclosed real estate.

“Just where do all these things go, and who can buy them in a timely fashion?” the Citicorp source asked, adding that Citicorp was the obvious candidate.

BankAmerica has rebuffed First Interstate’s merger offer, saying it sees no need to merge with anyone at this time. It is seeking buyers for numerous units in an effort to raise capital and remain independent.

BankAmerica has said that it intends to sell as much as $8 billion worth of overseas assets, including subsidiary banks in Italy, West Germany and Spain and branches around the globe. First Interstate has indicated that it likely would sell off numerous foreign and domestic operations if it acquires BankAmerica.

Another industry source said Chase Manhattan and the foreign banks are exploring ways to acquire overseas assets of BankAmerica, either directly from BankAmerica or from First Interstate if the banks are merged. Chase Manhattan also would like to increase its West Coast retail banking presence, the source said.

Chicago’s Northern Trust already has approached BankAmerica about the possible purchase of its personal trust department, BankAmerica sources said. A source close to First Interstate said Northern Trust also has had preliminary talks with First Interstate about BankAmerica’s trust business if the California banks are merged.

Meanwhile, California state Assembly Speaker Willie Brown is considering special legislation to allow out-of-state institutions, including Citicorp, to bid for BankAmerica, a spokeswoman for the lawmaker said Tuesday.

Such a bill would hasten the implementation of the recently passed interstate banking law that will open California to interstate banking in the Western United States next year and to the rest of the country in 1991.

The spokeswoman said that some legislators believe open bidding would help ensure that large BankAmerica shareholders, such as the California public employee retirement fund, receive a fair market price for their stock in the event BankAmerica is taken over.

The Legislature may assign the bill “urgency” status to put it in motion faster, the official said.

A spokeswoman for state Treasurer Jesse M. Unruh, who also serves as trustee of the state’s employee retirement fund, said Unruh has discussed the bill with Brown and approves of the idea. He thinks that opening the BankAmerica bidding to the largest number of companies would bring the highest price for the pension fund’s 1.5 million BankAmerica shares.