Clock Ticking on 2 Big Banks
Expectations of an imminent merger between San Francisco-based Wells Fargo & Co. and U.S. Bancorp of Minneapolis have quieted for the time being due to differences over price and other details, sources close to the banks said this week.
The possible combination, which would mean loss of independence for California’s last major bank, has been rumored on Wall Street for weeks. Merger talk has sent Wells’ stock soaring. On May 1, for example, it rose 5% on such speculation.
A deal would link Wells, the nation’s 10th-largest bank with assets of nearly $100 billion and more than 1,900 branches in 10 states, with “super-regional” U.S. Bancorp, which has $70 billion in assets and customers in 17 states, including California.
“By company policy, we don’t comment on speculation of mergers or acquisitions,” said Kathleen Shilkret, a spokeswoman for Wells Fargo in Los Angeles.
Wells rumors intensified after April produced three of the four biggest merger agreements in U.S. history: the Travelers Group-Citicorp combination for $83 billion, the NationsBank-BankAmerica hookup for $60 billion and the $29-billion acquisition of First Chicago NBD Corp. by Banc One Corp.
If the Wells-U.S. Bancorp merger is completed, it is likely that John F. Grundhofer, the chief executive of U.S. Bancorp, will run the combined company, replacing current Wells CEO Paul Hazen, sources have said.
Rivals for more than 30 years, the two men were mentored by former Wells CEO Carl Reichardt. Concern over being replaced by his old rival may have Hazen scrambling to find another partner.
“Wells may be looking for a white knight,” said Charlotte Chamberlain, banking analyst with Jefferies & Co. in Los Angeles. Alternate suitors could include Norwest Corp. in Minneapolis and First Union Corp. in Charlotte, N.C., sources said.
Merger rumors involving the company are expected to persist, buoyed by the record wave of combinations in the industry.
As one person familiar with the companies said on Wednesday, “The clock on Wells is ticking.”
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Movement on Merger Rumors
Wells Fargo’s stock has fluctuated lately as rumors alternately flare up and die down that the big California banking company is about to be bought by U.S. Bancorp or another out-of-state rival. Until a rebound in the last few days, U.S. Bancorp’s shares had been dropping this month. In mergers, the stocks of acquiring companies often suffer because investors worry that the cost of the purchase will hurt short-term earnings. Daily stock price closes since March 2:
Wells Fargo
Wednesday close: $374.50
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U.S. Bancorp
Wednesday close: $41.19
Source: Bloomberg News
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