U.S. Bancorp to Buy California Bancshares
U.S. Bancorp agreed Monday to buy California Bancshares Inc. for about $309 million in stock, in a move that would boost its presence in Northern California.
U.S. Bancorp would almost double its market share in California with the proposed purchase of California Bancshares, which more than doubled its earnings in the last two years.
Just last month, Portland-based U.S. Bancorp bought West One Bancorp of Boise, Idaho, for $1.6 billion, strengthening its position as the biggest bank in the Northwest.
Investors drove down U.S. Bancorp shares Monday, reflecting concern that the California Bancshares purchase price is too high and that the Oregon bank is extending itself in a state with a weak economy.
“In Oregon, sometimes people cross their fingers when companies they own make acquisitions in California,” said analyst Eugene Goodrich of Black & Co. in Portland. “I haven’t heard anyone who’s excited about it.”
U.S. Bancorp stock fell 25 cents to close at $32.75, and California Bancshares stock rose $2.5625 to close at $30.3125. Both trade on Nasdaq.
U.S. Bancorp agreed to pay 0.95 share for each share of California Bancshares, or about $31.29 a share based on Monday’s stock prices.
It’s paying about 2.4 times California Bancshares’ book value of $13 a share; the average bank acquisition in the last year has been for about twice book. Book value is what’s left after a bank’s liabilities are subtracted from its assets.
The relatively high price will help keep U.S. Bancorp from boosting its earnings right away. The company said it expects the acquisition to knock 5 cents a share, or less than 2%, off this year’s earnings, and 3 cents a share, or less than 1%, off next year’s. California Bancshares should start contributing to earnings by early 1998, spokeswoman Mary Ruble said.
The purchase would extend U.S. Bancorp’s presence farther south in California. Investors are generally more enthusiastic about “in-market” acquisitions, in which overlapping branch networks leave plenty of room for firings and cost cuts.
U.S. Bancorp has 57 branches in California, but only one south of Sacramento. San Ramon-based California Bancshares, with $1.6 billion in assets, has 36 branches in the east San Francisco Bay Area and in Northern California’s Central Valley.