In a sudden and large burst of merger activity, First Union Corp. said Monday that it has agreed to spend a total of $715 million in stock for two thrifts at opposite ends of its superregional empire.
The Charlotte, N.C., banking company said it would pay $379 million for Center Financial Corp., a $3.7 billion-asset thrift in Waterbury, Conn. And it will pay $336 million for Home Financial Corp., a $1.2 billion-asset thrift in Hollywood, Fla.
The deals rank among the largest since January, when a wave of bank megamergers crested with Wells Fargo & Co.'s blockbuster deal for First Interstate Bancorp.
First Union expects the planned acquisitions to detract little from earnings this year and to add 5 cents a share to earnings in 1997. The company's stock closed Monday at $60.50, up 50 cents.
Still, the deals drew an impatient response from some analysts. Dean Witter analyst Anthony R. Davis said Wall Street wants First Union to slow down and digest some of the big purchases it has made over the past year.
"People are just tired of having to analyze acquisitions at First Union," Mr. Davis said. "They would like to see the company just manage what they've got."
First Union is still absorbing First Fidelity Bancorp., which it acquired in January in a deal that swelled its assets about 60%, to $131 million.
To boost First Union's stock price, chairman and chief executive Edward E. Crutchfield has been downplaying the bank's acquisition strategy since the end of last year. In speeches and press interviews, he said First Union would eschew major out-of-market deals to concentrate on small, fill-in transactions.
The Center and Home deals meet those criteria. First Union already has extensive operations in Florida, and it gained a modest presence in Connecticut with the First Fidelity acquisition. Still, the two latest thrift deals come just one month after First Union plunked down $900 million for the railroad freight car leasing business of USL Capital Corp.
First Union agreed to buy Center Financial at a price equaling 165% of the thrift's book value, a premium roughly in line with those of other recent deals. Due to Home Financial's $313 million in excess capital, the ratio for the Florida thrift was lower: 106% of first-quarter book value of $13.32 per share.
Home Financial executive vice president Harry MacDougall said he hoped for an appreciation in First Union's stock by yearend, when both deals are expected to close.
"We will go along with the ride - that's the way I look at it," Mr. MacDougall said.
To make the two deals pay off, First Union is planning massive cost reductions: 40% of Center Financial's annual expense base, and 50% in the case of Home Financial.
The purchase of Center Financial would boost First Union's deposit market share in Connecticut, the northernmost state in its franchise, from sixth place to third.
First Union currently has $2.7 billion of assets in Connecticut and 65 branches, all from First Fidelity. The Center Financial deal is First Union's first in the Northeast since the First Fidelity pact was announced last June 19.
Center Financial's president and CEO, Robert J. Narkis, said his company's investment banker, New York-based Keefe, Bruyette & Woods Inc., received an overture from First Union in April. The Center Financial board decided in May to invite three banks, including First Union, to conduct due diligence and make offers.
Mr. Narkis said the winning First Union offer promised a better return for Center Financial shareholders than continuing to keep the bank independent.
A similar motivation inspired Home Financial to strike a deal with First Union, although the twists and turns of that negotiation proved a bit more convoluted.
Home Financial had been on the block for much of the year but failed to land an attractive offer. On May 29 the thrift announced it had terminated acquisition discussions and would attempt to reduce its excess capital through a stock buyback program and special dividend to shareholders.
Mr. MacDougall said Home Financial received a call from First Union last week asking to reopen discussions. The two sides began meeting last Friday and put together an agreement over the weekend, he said.
