U.S. Bancorp to Be Sold to Firstar
Banking brothers John and Jerry Grundhofer--who built their careers in California before leaving to lead their own financial institutions in the Mid-West--said Wednesday they would combine their banks in a $19-billion deal.
The sale of John Grundhofer’s Minneapolis-based U.S. Bancorp to his younger brother’s Milwaukee-based Firstar Corp. will create the nation’s eighth-largest bank, with about $160 billion in assets in 24 states.
Though the brothers are well-known in California, the merger will have minimal impact in the state because Firstar has no branches.
After an aggressive expansion over the past two years, U.S. Bancorp has acquired 140 California offices and nearly $6 billion in deposits, now ranking as the state’s seventh-largest bank.
The deal--expected to close in the first quarter 2001--is yet another sign of the renewed interest in financial services mergers. Last month, Chase Manhattan and J.P. Morgan announced a $35-billion deal.
U.S. Bancorp began searching for buyout partners earlier this year when it became clear that the bank would be unable to meet its revenue-growth goals.
“Changes are taking place rapidly in this industry and we needed to keep pace with the technology investment required to be a leader,” John Grundhofer said Wednesday.
Analysts called the deal, which has been rumored for months, the ultimate one-upmanship in the sibling rivalry between the competitive and sometimes cocky Grundhofer brothers.
But in a conference call, the brothers downplayed any competition and said they jointly called their 90-year-old mother Wednesday morning to break the news.
The pair grew up in Glendale and made their names at large California banks. John “Jack” Grundhofer was a top executive at Wells Fargo, while brother Jerry worked his way up Security Pacific Corp. until it was acquired by Bank of America.
John Grundhofer will be chairman of the new company, which will use the U.S. Bank name, until his retirement in 2002. Jerry Grundhofer will become president and chief executive, handling day-to-day operations.
Though both brothers are known as fierce cost cutters, they said Wednesday they did not anticipate significant layoffs.
Under terms of the deal, Firstar will swap 1.265 of its shares for each share of U.S. Bancorp.
Firstar stock fell $2.25, or 10%, to close at $20 on the New York Stock Exchange, while U.S. Bancorp’s stock rose $1.81, nearly 8%, to close at $25, also on the NYSE.