Holders of 1st Interstate, Allied Approve Takeover

Times Staff Writer

First Interstate Bancorp completed its acquisition of Allied Bancshares of Houston on Friday after shareholders at both companies approved the transaction by big margins.

The deal closed shortly after the shareholder votes were announced at simultaneous meetings in Los Angeles, where First Interstate is based, and in Houston.

A spokesman for First Interstate said 30,920,214 shares were voted in favor of the deal and 2,357,654 against. At Allied, the total was reported as 29,086,262 in favor and 326,728 against.

The price on the deal is difficult to determine because the final amount depends heavily on how Allied performs over the next five years. Analysts estimated the total price to be between $320 million and $380 million after First Interstate forced a $41-million price reduction last month.

Texas is the nation's third-largest consumer banking market, behind California and New York. A major presence there has long been sought by First Interstate's expansion-minded chairman, Joseph J. Pinola.

Risky Transaction

First Interstate, the nation's ninth-largest bank holding company, now owns banks in 13 Western states, including First Interstate of California. Allied represents an addition of almost 20% to First Interstate in terms of assets.

But analysts have said the transaction poses some risk because of the troubled Texas economy. Banks in Texas have posted record losses in recent quarters and Allied lost $318 million in 1987, largely as a result of provisions for potential losses on real estate loans.

First Interstate lost $556.2 million last year, largely because of its similar provisions for losses on Latin American and domestic loans and for restructuring costs.

The acquisition was structured in a way designed to protect First Interstate by pegging the ultimate price to Allied's future earnings. In addition, $250 million worth of Allied's worst loans were placed in a new entity and its shares were distributed to Allied shareholders.

First Interstate has said it plans to retain Allied's top management.

No official announcement has been made that Allied will be renamed First Interstate of Texas, but sources confirmed that the new name will be unveiled next Tuesday, along with a major media campaign aimed at bringing more individual customers to the Texas bank.

Allied, like most Texas banks, has traditionally relied on commercial, oil-related customers and is expected to benefit from First Interstate's reputation as a strong consumer bank.

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World