Security Pacific Corp., a Los Angeles institution for more than a century, officially disappears today when it is merged into San Francisco-based BankAmerica Corp. to form the nation's second-largest banking company.
The long-awaited, $5-billion acquisition, the largest bank merger in U.S. history, was scheduled to take effect at 12:01 a.m., as called for in papers filed by BankAmerica with the secretary of state in Delaware, where the San Francisco bank is incorporated.
While the merger--first announced on Aug. 12--creates a powerful banking behemoth with nearly $200 billion in assets, it also leaves the bank's leaders with the daunting task of meshing over the next 18 months the staffs of two longtime rivals.
Security Pacific, which traces it roots as far back as the 1871 founding of Farmers & Merchants Bank at the corner of 4th and Main streets in Los Angeles, will see its name phased out in the coming year from signs on hundreds of bank branches, as well as millions of customer checkbooks, automated teller cards and credit cards as they are converted into Bank of America accounts.
BankAmerica's last major hurdle came with the surprise announcement Tuesday that it would sell 49 branches in Arizona, as required for antitrust reasons, to the newly formed Independent Bancorp of Arizona, organized mainly by former Postmaster General Anthony M. Frank and longtime banking executive Richard W. Decker Jr. Investors include former Baseball Commissioner Peter V. Ueberroth, as well as institutional investors that include major pension funds, Frank said.
Both BankAmerica and Security Pacific sought to downplay the official marking of the merger. Security Pacific Chief Executive Robert H. Smith, who today becomes BankAmerica's president and chief operating officer, said he had no special plans to mark the merger and wasn't feeling especially nostalgic as the final hours ticked away.
"The history never goes away. It continues on as the history of BankAmerica," Smith said.
Likewise, Smith's BankAmerica counterpart, Richard M. Rosenberg, who will serve as chief executive of the bank, held no special celebration Tuesday at his San Francisco office.
The newly merged bank will be under intense pressure from three sides. Wall Street and institutional shareholders expect the bank to move swiftly to cut costs and realize the huge, $1.2-billion-a-year savings the bank has promised to achieve within three years.
In addition, thousands of employees are anxiously waiting to find out their futures at the newly merged bank, which is cutting up to 12,000 positions over the next three years. In addition to the personnel shuffling, blending the corporate cultures is expected to be equally challenging.
Industry executives and analysts said that the bank must especially work to make sure that hostile camps of former BankAmerica and Security Pacific employees don't form, something that often happens in mergers.
Finally, Security Pacific customers will be closely monitoring everything from their checking and loan accounts to the performance of their automated teller machines for the slightest sign of a foul-up.
"Those ATMs better work tomorrow," joked bank analyst Thomas K. Brown of Donaldson, Lufkin & Jenrette.
All the while competitors will be circling to pick off any business. Some analysts and industry executives say as much as 5% to 10% of the bank's business could eventually spill over to others.
Customers probably won't notice much for some time. Security Pacific accounts will eventually become Bank of America accounts, although that isn't expected to start until summer because extensive work is required to convert computer systems.
The bank is expected to begin closing some California branches and merging them with nearby branches starting in September. BankAmerica operates in 10 states, with an acquisition in an 11th, Hawaii, expected this summer.
Security Pacific's shareholders clearly have made out better than they were doing before the deal was announced. On Aug. 9, the last trading day before the deal was disclosed, Security Pacific's stock traded at $23 a share.
On Tuesday, it surged $2.125 to $39.50 a share. Each of Security Pacific's 128.3 million shares will be swapped for 0.88 of a BankAmerica share, which traded at $45 yesterday. That values the deal at more than $5 billion.
Digesting Security Pacific is likely to slow for at least 18 months B of A's aggressive expansion across the country. The bank has rapidly expanded across the West, most recently by buying the failed Sunbelt Savings in Dallas.
Shaping up in the next few years is a battle among several powerful banks outside New York, among them Bank of America, Ohio's Banc One and North Carolina's NationsBank, that are moving quickly toward becoming the country's first true nationwide banks.
Last week, Banc One unexpectedly acquired the largest bank in Arizona, Valley National Corp., for $1.2 billion, setting the stage for head-to-head competition between two of the most closely watched banks in the United States.