Citizens & Southern to Battle Takeover

Two Southeastern banking giants are girding for a long battle as North Carolina-based NCNB Corp. stands by its $2.4-billion hostile takeover bid for Georgia-based Citizens & Southern Corp.

Citizens, a $21-billion bank holding company based in Atlanta, has rejected the NCNB bid and invoked Georgia’s anti-takeover law. It has also hired an array of legal experts and financial advisers.

However, Charlotte, N.C.-based NCNB, the $50-billion banking behemoth of the growing Southeast region, has reiterated its intention to carry out a deal that would be among the biggest mergers in American banking history and create the nation’s sixth largest bank.

Analysts Divided

NCNB also urged Citizens to reconsider its offer to exchange one share of Citizens for 1.075 shares of NCNB in a stock swap valued at $2.4 billion.

Analysts were sharply divided over how effective the defenses would be.

Henry Coffey Jr. of Nashville, Tenn.-based J. C. Bradford & Co. sees a protracted fight by Citizens to stay independent.

“All indications are that Citizens & Southern management will do everything in its power to rebuff NCNB. . . . The management is hesitant to hand over annualized earnings growth of 13% to 15% to another party,” he said.

May Increase Pressure

However, Morgan Stanley analyst Dennis Shea predicted that Citizens will put up “what looks like quite a fight, but in the end I don’t see any points raised as hurdles that can’t be overcome. If NCNB needs to boost its bid modestly to get the deal on a friendly basis, I see them doing that,” he added.

Thomas Hanley of Salomon Bros. said NCNB “may choose to put even more pressure on Citizens’ board by modestly increasing the terms of the offer. . . . I have a feeling this may not drag out beyond the next six to nine months.”

NCNB stock has risen handsomely over the past several months as institutional investors have been bullish on the company’s profit outlook.

Operates in 7 States

However, one analyst who asked not to be identified questioned Wall Street’s ebullient view, noting NCNB may find its resources strained if it were to add Citizens to its new Texas assets.

NCNB operates in seven Southern states and manages assets of more than $50 billion. Its own assets totaled $29.85 billion at the end of 1988, but it also manages $25.6 billion in assets that belonged to Dallas-based First RepublicBank, of which it bought a 20% interest last summer and renamed NCNB Texas. It also acquired a five-year option to buy the remaining 80% from the Federal Deposit Insurance Corp.

Expects Problems

“The government is aiding them in taking over First RepublicBank and then they’re trying to use those tax breaks to try to buy us,” said Citizens’ spokesman Scott Screedon.

He said Georgia regulators would likely oppose the proposed takeover “because of the possibility that Georgia assets may be expected to be shifted to Texas” to help NCNB fulfill its commitment to revive First RepublicBank.

Citizens’ officials also told analysts in a briefing Tuesday that NCNB’s capitalization would be weaker if it takes over Citizens. They said this flies in the face of the Federal Reserve Board’s position in the past that the survivor in a bank merger must have stronger capitalization than before the combination.

Citizens’ Screedon said his bank is “more strongly capitalized than NCNB . . . in effect they’d weaken us if we were acquired.”