Shares Rise on Talk of Bank Deal
First Interstate Bancorp shares jumped $3.75 to an all-time high of $100.125 on Friday on speculation that California’s second-largest banking company will merge with No. 3 Wells Fargo & Co.
Some of Wall Street’s favorite stories these days involve bank deals, and the banking sector was up across the board Friday, spurred by an article in BusinessWeek magazine quoting analyst George Salem of Gerard Klauer Mattison & Co. Neither company commented on the speculation Friday. Salem thinks a Wells-First Interstate deal not only makes sense but also is likely to happen, as industrywide consolidation pressures force the two firms into each other’s arms, he said in an interview Friday.
Under Salem’s scenario, San Francisco-based Wells would buy Los Angeles-based First Interstate for about $110 a share.
Salem had initially speculated about a buyout price of $120 a share but said he lowered his estimate after an hourlong conversation Thursday with Wells’ chief financial officer, Rodney L. Jacobs.
Salem said Jacobs told him Wells is not interested in any deals that would cause his company’s stock to fall. At $110, Salem calculates that there would be enough immediate value to shareholders on both sides that both stocks would rise.
As with the impending marriage of Chemical Banking Corp. and Chase Manhattan Corp.--much applauded by Wall Street--the biggest positive in a Wells-First Interstate merger would be cost savings.
Salem estimated that eliminating the huge overlap between the two companies would slash First Interstate’s costs by 55% in California.
Another reason for the move is defensive: “Wells has to worry about NationsBank or Banc One grabbing First Interstate ahead of them,” Salem said, referring to the acquisitive super-regional banks from North Carolina and Ohio, respectively.
A potential impediment to the Wells-buys-First-Interstate scenario is a human factor: First Interstate’s new chairman, William E. B. Siart, just took over the reins this year and presumably would be reluctant to give up control.
Wells Fargo stock gained $1.625 to $186.875 on Friday. Shares of BankAmerica Corp.--San Francisco-based parent of Bank of America, California’s largest and the nation’s second-largest bank--added $1.125, to $58.375. The three companies’ shares trade on the New York Stock Exchange.
