First Union Corp. said Monday it has agreed to acquire American Savings of Florida FSB, a move that will significantly expand its franchise in the Miami area.
First Union said it will pay $253 million in stock for Miami-based American Savings, or 1.14 times the thrift's stated book value. The price of $21 a share represents 1.6 times the thrift's tangible book value.
American Savings has $3.5 billion of assets and $2.2 billion of deposits, with 29 branches located primarily in Broward and Dade counties. Despite a troubled history, American Savings had staged a strong recovery in recent years and earned $13 million in the first nine months, representing a 0.52% annualized return on assets.
"We think the $21 a share is a fair price for American Savings and the culmination of a long road back," said senior vice president Carlos Fernandez-Guzman.
First Union said it expected to close the deal in the first half of next year, pending approval from regulators and American Savings' shareholders. Goldman Sachs represented American Savings in the negotiations.
The transaction will provide Charlotte-based First Union, which operates the second-largest bank in Florida, access to 180,000 new deposit accounts and a strengthened franchise in Miami, Fort Lauderdale, and West Palm Beach.
Carlos Migoya, First Union's area president in Miami, said that the bank's deposit share in Dade County would go from 12% to nearly 16%, including some other recent acquisitions.
A First Union spokesman said the deal would cause "very minor" dilution to First Union's earnings per share in the first year, but would subsequently add to earnings. First Union plans to cut the thrift's $60 million annual expense base by one-fourth, but could not estimate how many branches or employees would be eliminated.
The sale of American Savings came as no surprise to outside observers, although earlier negotiations with First Union were broken off in November. The thrift's 48% owner, the bankruptcy trustee administering the assets of principal owner Enstar Group Inc., was required to sell its entire stake by June 1, 1995.
"This is the cleanest way for Enstar to get rid of their shares and the easiest way for American Savings to deal with the problem," said Deborah R. Beylus, an analyst with JW Charles/CSG in Boca Raton, Fla.
American Savings was acquired by Enstar, a Michael Milken client, in 1987. Enstar pumped $300 million worth of junk bonds into the thrift, which caused $102 million of losses in 1989 and $70 million in 1990.
