First Bank System Inc. on Thursday agreed to acquire U.S. Bancorp for about $9 billion in stock, fulfilling a long-sought goal of expanding to the West Coast.
First Bank's acquisition of Portland, Ore.-based U.S. Bancorp would form the 14th-largest U.S. bank, with $70 billion in assets and 1,000 branches from the Mississippi River to the Pacific Ocean.
Minneapolis-based First Bank has been eager to expand westward after an agreement last year to buy First Interstate Bancorp of Los Angeles was thwarted by a hostile bid from Wells Fargo & Co.
"It was clearly the No. 1 company in our sights," First Bank Chairman John Grundhofer, who will be chief executive after the takeover, said in an interview.
The acquisition would take a heavy human toll as Grundhofer, who is nicknamed "Jack the Ripper" for firing employees, plans to eliminate 4,000 jobs to boost profit.
With First Bank paying 3.4 times U.S. Bancorp's book value and 19 times last year's earnings, it's one of the priciest takeovers in a consolidating industry.
It rivals Wells Fargo's $11-billion takeover of First Interstate, showing how much banks are willing to pay to move into new markets and reduce costs.
Under a definitive agreement, U.S. Bancorp shareholders will receive, in a tax-free exchange, 0.755 share of First Bank common stock for each U.S. Bancorp share they own.
Based on First Bank's trading price of $75.50 Thursday, which was down $2.75 on the New York Stock Exchange, the purchase price equals $56.53 a share for holders of U.S. Bancorp, whose shares jumped $6.875 to close at $55.125 in Nasdaq trading.
The purchase would double First Bank's market value, analysts said.
The combined bank will retain the name of U.S. Bancorp but maintain a single headquarters in Minneapolis.