NationsBank Confirms Montgomery Buy

NationsBank Corp. confirmed Monday that it will buy Montgomery Securities for $1.2 billion in cash and stock, greatly expanding the ability of California’s largest investment bank to raise capital for fast-growing companies nationwide.

Charlotte, N.C.-based NationsBank, the fourth-biggest U.S. commercial bank, will pay 70% in cash and the rest in stock for San Francisco-based Montgomery, which specializes in financings for health-care and technology companies. Montgomery has wanted more capital to grow into one of the top five underwriters of stocks and high-yield bonds.

The deal is expected to close in October.

The purchase agreement is part of a wave of sales of securities firms this year. As restrictions crumble regarding commercial banks’ involvement in the lucrative securities industry, more banks are teaming up with investment banks.

Analysts call the deal a good fit, noting that NationsBank gets Montgomery’s strong research division, equity distribution and underwriting capabilities for growing companies. Montgomery was the 10th-largest equity underwriter in the nation last year, according to Securities Data, a research firm in New Jersey.

“This enhances our ability to provide one-stop shopping for both of our clients,” said James H. Hance Jr., NationsBank’s chief financial officer. “With this we can move into the global distribution of equity.”

Montgomery will become part of NationsBanc Capital Markets Inc., NationsBank’s securities unit, which will be renamed NationsBanc Montgomery Securities. Executives on both sides stressed that Montgomery will retain significant autonomy.

Thomas Weisel, chief executive and founder of Montgomery, will continue to lead the firm. As part of the purchase agreement, NationsBank has set up a $100-million pool to help retain key executives who aren’t partners.

Shares of NationsBank fell 69 cents to close at $64.56 on Monday on the New York Stock Exchange. Shares had already dropped slightly in the second half of last week, when rumors of a purchase hit Wall Street.

So far this year, BankAmerica Corp. has agreed to buy Montgomery rival Robertson Stephens for $540 million, and Swiss Bank Corp. said it would acquire Dillon, Read & Co. Bankers Trust New York Corp. agreed to purchase Alex. Brown in April.