Zions Bank Plans to Buy Rival First Security for $5.9 Billion

Zions Bancorp, the No. 2 bank in Utah, on Sunday agreed to buy its bigger rival First Security Corp. for $5.9 billion in stock to create the 20th-largest bank in the U.S.

Zions, which has about $18 billion in assets, will exchange 0.442 of its shares, or $28.90 a share, for each share of First Security, a 55% premium to First Security’s closing price Friday of $18.63 on Nasdaq. First Security has about $22 billion in assets.

The new bank, which would have assets of about $40 billion and branches in 10 states in the West from Utah and Idaho to Washington and Oregon, would be known as First Security Corp. and would be based in Salt Lake City, where the merging banks are headquartered.

Zions and First Security said they would cut about $108 million in expenses from the combined bank by 2001.

The acquisition would result in the loss of as many as 2,000 jobs, or nearly 12% of the banks’ combined work force, officials said at a joint news conference.

The banks expect the purchase to add 10% to Zions’ earnings per share in 2000 and 14% in 2001.

Shares of Zions have gained more than 31% in the last 52 weeks, while those of First Security have fallen 21%. Zions rose 44 cents to close at $65.38 on Nasdaq.

Zions has branches in eight states and has made several acquisitions in the last few years, particularly in California, where it purchased Sumitomo Bank of California for $546 million in 1998. First Security has branches in seven states.

The banks said they would sell some deposits in Utah.