Fleet Financial to Purchase Shawmut for $3.7 Billion : Mergers: The deal, subject to shareholder and regulatory approval, would create ninth-largest banking firm in U.S.

In a combination that would create the nation’s ninth-largest banking firm, Fleet Financial Group of Providence, R.I., said Tuesday that it has reached a definitive agreement to buy Boston-based Shawmut National Corp. for $3.7 billion, or $30 a share, in stock.

The merger, approved Monday by the boards of both banks, is as much about survival in the tough new world of financial services as it is about New England’s biggest bank getting bigger. The deal is subject to approval by shareholders and federal regulators.

“We’re getting into some dangerous waters,” said Fleet Chairman J. Terrence Murray, who would be president and chief executive of the merged bank. “Unless you’re strong and have some muscle, you have no control over your own destiny.”

The banks expect to save $400 million a year by closing branches, combining processing operations and cutting the work force by an estimated 10%--about 3,000 employees over the next 18 months. Those cuts would come on top of a cost-cutting program Fleet began a year ago, under which it intends to pare 5,500 positions and save $300 million.

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The merged company, to be called Fleet Financial Group, would be based in Boston and would have combined assets of more than $80 billion and deposits of $50 billion. It would remain heavily concentrated in New England and New York State, though Fleet’s mortgage banking subsidiary, Fleet Mortgage Corp., operates nationally and is America’s second-largest home loan servicer after Pasadena-based Countrywide Credit Industries.

Fleet also does commercial real estate lending and other lending around the country, but effects of the move outside the Northeast would be minimal, analysts said.

Fleet has spent the last two years looking for ways to expand, cut expenses and diversify. The Shawmut purchase could help it cut overhead but offers little geographic expansion and few new lines of business.

“It just concentrates them more in New England, and that could be a problem,” said Nancy Bush, bank analyst with Brown Bros. Harriman & Co.

The deal, which Murray said should go forward in about six months, would create New England’s leading bank in consumer deposits, consumer loans, private banking, government banking and middle-market lending.

The new Fleet Financial Group would also have the largest networks of branches and automated teller machines in the region. There would be 900 branches after it divested 75 to 90 branches and closed another 150 to 160, Murray said.

Several industry analysts called the merger a good fit.

“The combination of the two entities is going to be a major win for both Shawmut and Fleet shareholders in the long run,” said Gerard Cassidy, an analyst for Hancock Institutional Equity Services in Portland, Me.

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Under the agreement, Shawmut Chairman and Chief Executive Joel B. Alvord, 56, would serve as chairman of the new bank until he reaches 60, when Murray, now 55, would take over that position.

Under the deal, Fleet would swap about 0.9 share of its stock for each of Shawmut’s 119.6 million shares outstanding. Based on Friday’s Fleet stock closing price of $33.62 per share and Shawmut’s stock price of $20.63, the transaction would be valued at about $3.7 billion, or about $30 per Shawmut share--a premium of about 45% for Shawmut stockholders.

Shawmut shares closed up $4.375 at $25 and Fleet shares fell $3.25 to $30.375 in active trading on the New York Stock Exchange.