Wells Fargo Chief Open to Buyout Offers

Wells Fargo & Co., the second-largest California bank, would consider a buyout as a wave of mergers in the industry pushes stocks to record highs, the bank’s top executive said.

Chairman and Chief Executive Paul Hazen said in an interview that the high prices banks are commanding in buyouts makes a sale something Wells Fargo has to consider. Its stock rose $15.81 to close at $332.06 on the NYSE after it surged as much as 10.7% in trading of 1.78 million shares, more than four times the daily average of the past three months.

“At these kinds of multiples, these kinds of prices, if somebody came to you with a story that would cause the currency of the combined company to appreciate, then I’m open to it,” Hazen said.

Banks are buying each other at a record pace as they seek to cut costs and boost profits. First Union Corp. agreed to purchase CoreStates Financial Corp. for more than $16.1 billion last month, a record price for a U.S. bank. The price was 5.39 times CoreStates book value, essentially its assets minus its liabilities.

NationsBank Corp. said in August that it would pay $13.8 billion for Barnett Banks Inc., equaling 3.99 times book value and 25.2 times earnings. National City Corp. earlier this month agreed to buy First of America Bank Corp. for $7.1 billion, equaling 3.84 times book and 22.8 times earnings.

Wells currently trades at about 2.25 times book value and more than 31 times earnings.

“It could happen,” said James Schmidt, a portfolio manager at John Hancock Funds, which owned about 362,000 Wells Fargo shares at the end of September, about a purchase of Wells.

Hazen didn’t say his bank is currently in acquisition talks, and a bank spokeswoman declined to comment. Hazen was interviewed at the Bank Administration Institute retail conference in New Orleans.

“It’s my belief that no discussions are currently going on,” said Donaldson, Lufkin & Jenrette Securities Corp. analyst Thomas Brown.

Late in the day, Brown Brothers Harriman & Co. banking analyst Raphael Soifer downgraded Wells Fargo to “trading sell’ from “hold.”

Hazen said few potential acquirers could afford to buy the San Francisco-based bank, which has a market value of almost $30 billion. He said he would be skeptical of any offers.

“Big mergers at big prices bear the same risk we had in our acquisition of First Interstate,” Hazen said. Wells Fargo’s $13.2-billion hostile takeover of First Interstate Bancorp in 1996 was followed by computer system breakdowns and customer defections that cut into revenue and profits.

An unsolicited offer for Wells Fargo is unlikely, Hazen said. “After our experience with a hostile, I doubt anybody would do that kind of thing again,” he said.