N.Y. and Texas Banks to Join in Largest Merger
Chemical New York Corp. and Texas Commerce Bancshares Inc. said today that they would merge in a cash and stock transaction valued at $1.1 billion, the biggest U.S. bank merger ever.
The transaction, which officials said is expected to be approved by shareholders and federal regulators by early next year, would also be the first major merger of a Texas bank with an out-of-state bank since state lawmakers eased restrictions on such deals earlier this year.
“Texas banks have been under some additional need to bolster funding,” said Ben Love, chairman of Houston-based Texas Commerce. “That need, as far as Texas Commerce Bank is concerned, evaporates with this merger because we have the funding abilities to supplement our current abilities.”
Chemical Chairman Walter Shipley, who joined Love at a news conference here, said the merger would represent “the first really large transnational consolidation of two great banking institutions into one better institution than either of the two individually have been.”
Deal No Bail-Out
Love denied that the deal, which would top the $1.07-billion acquisition of Crocker National Corp. by Wells Fargo & Co. earlier this year, was a bail-out.
“I don’t think this could be characterized as a rescue from any perspective,” Love said. “The financial services industry is changing. Texas Commerce is itself a product of 54 mergers, most of which have occurred since 1972. So this is simply a continuation of a pattern.”
Texas Commerce lists $18.9 billion in assets, making it the 26th-largest bank holding company in the country.
Chemical New York Corp. is the sixth-biggest U.S. banking concern with assets of $56 billion, and is the parent of Chemical Bank.
Texas Commerce, which has Texas’ largest branch network with 70 branches, is considered by many industry analysts to be the strongest bank in a state where most businesses have been battered by the depression in the region’s energy, real estate and farming industries.
Real Estate, Energy Woes
This year 22 Texas banks have failed, primarily due to problems in the state’s real estate and energy industries.
Texas Commerce’s recent performance has suffered from heavy loan losses and high levels of non-performing assets.
Under the terms of the merger agreement, which the two companies valued at about $35 a share, each share of Texas Commerce stock will be exchanged for $7 in cash; nine-hundredths of a share of Chemical common stock, worth about $4 based on the Dec. 12 closing price of $44.37 1/2; one share of a new preferred stock valued at $12 a share; and one share of a new Chemical Class B common stock, the value of which will be based on Texas Commerce’s future earnings.
