Uncertain whether Dominion Bankshares Corp. would be snapped up at a hefty price, the stock market Friday pushed Dominion's shares down slightly in heavy trading.
By late Friday, Dominion was down 50 cents, to $16.375. This came after gains of $2.50 Thursday and $1.25 Wednesday, when the takeover speculation first erupted.
Both First Union and Dominion announced they were in merger talks Thursday, but each declined to identify the other party.
Analysts assumed First Union is negotiating with Dominion. But the slippage in Dominion's price "shows there's obviously skepticism on First Union buying Dominion, or it could mean First Union wants to buy at a lower price," said Frank Anderson, who is with Stephens Inc. in Little Rock, Ark.
Causing additional confusion
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Friday was the suspicion that First Union may be looking at some other potential acquisition in addition to Dominion. First Union's announcement Thursday mentioned "merger discussions with other financial institutions," not just one bank.
Late Friday, First Union did announce it agreed to pay $46 million for Meritor Savings, a thrift with $1.2 billion in assets, 29 branches in Florida, and 15 in the Washington area. The possibility remained that First Union could still buy yet another institution. But the Meritor announcement is sure to take some steam out of the Dominion rumors.
When word about Dominion's merger talks leaked out Wednesday, most analysts were speculating that the $9.4 billion-asset company would sell for about $774 million, representing $20 a share or 1.5 times book value.
But Kathryn Bissette of Sterne, Agree & Leach Inc., Atlanta, said market rumors were now suggesting a lower price, closer to $618 million, which equals $16 a share or 1.2 times book.
To Ms. Bissette, the weakness in Dominion's stock on Friday suggests that the purchase price would be less than $20 a share.
There was market speculation Friday that Dominion had invited other bidders after failing to secure the price it wanted from First Union.
But analysts had a hard time identifying other banks in the Southeast that would be likely to bid aggressively against First Union.
Wachovia Corp., based in Winston-Salem, N.C., has long made known its interest in Virginia. But Wachovia is considered unlikely to tarnish its pristine credit quality by buying a bank such as Dominion, which has a 6.4% nonperforming assets ratio.
Similarly, Sun Trust Banks Inc., Atlanta, has repeatedly stated its aversion to purchasing ailing banks.
NationsBank Corp. would be more likely to look at Dominion, but chairman Hugh McColl already has plenty on his plate.
