Large Ohio Bank Moving Into the West : Banking: Banc One will acquire Valley National of Arizona, creating the country’s eighth-largest institution.

Ohio-based Banc One Corp. on Tuesday said it will acquire Arizona’s largest bank, Valley National Corp., for $1.2 billion in stock, creating the nation’s eighth-largest bank with its first major thrust into the West.

The unexpected acquisition means that Banc One, which in recent years has emerged as one of the nation’s premier banks, is now a head-to-head competitor with BankAmerica Corp. The two banks, which have competed to a limited extent in Texas, are among the industry’s most aggressive and closely watched institutions as they expand across the country.

In Arizona, Banc One will become the state’s largest bank with the acquisition of Phoenix-based Valley National. BankAmerica will be a shade behind after it completes its expected acquisition of Security Pacific Corp. this month.

“They (Valley National) are a great retail franchise, and we will have some fun,” Banc One Chairman John B. McCoy said.

Betty Riess, a spokeswoman for San Francisco-based BankAmerica, said, “Valley was a strong competitor before, and will be even stronger now. The competition is good for the marketplace.”

Banc One, based in Columbus, Ohio, is paying more than twice the book value for Valley National, which Wall Street analysts considered a higher-than-expected price. In trading on the New York Stock Exchange, Banc One’s stock closed down $1.50 to $45.625. Valley National’s stock, which is traded over the counter, moved up $11.75 to $49.75.

If the acquisition--and several smaller ones now pending--is approved by shareholders and regulators, Banc One would become the nation’s eighth-largest banking company with about $72 billion in assets.

Valley National, which has $11 billion in assets, was hammered by problem loans after Arizona’s economy softened in 1989. The slowdown was caused largely by overbuilding in anticipation that population would grow faster than it did.

McCoy said that Valley National’s management has controlled the bank’s problems and that the Arizona economy is headed toward a recovery.

Valley National has seven offices in California, so the acquisition has the effect of putting Banc One in the state for the first time. It also raised speculation that Banc One may soon move into the California market in a big way by acquiring a large institution.

Although acknowledging that Banc One could make a push into California this decade, McCoy downplayed the speculation that it will happen soon, noting that the bank is busy digesting a number of acquisitions.

In addition, McCoy noted that Banc One’s goal is to be one of the three largest banks in each state it is in. Opportunities to do that in California are limited, he said.

Securities analysts said that should Banc One target California, it would most likely wait a couple of years--until it is assured that the California economy is back on track.

“Banc One doesn’t like to do deals that can blow up on them,” said Moshe A. Orenbuch, an analyst with the New York investment firm Sanford C. Bernstein & Co.

Nonetheless, some are intrigued especially by the possibilities of a combination of Banc One and First Interstate Bancorp of Los Angeles.

“If Banc One’s merger template says they want to look at a bank that is retail oriented, then First Interstate fits that bill totally. You would fill in the states between California and Ohio,” said analyst Thaddeus W. Paluszek of Kidder, Peabody & Co. in New York.

However, First Interstate may not be a willing partner. It said Tuesday that it may be making its own acquisitions, possibly with the financial muscle of Kohlberg Kravis Roberts & Co., the New York investment firm.