Union Planters Corp. said Friday it has agreed to pay $523 million in stock to acquire a pesky Tennessee thrift competitor, Leader Financial Corp.
The stock deal would improve $11.3 billion-asset Union Planters' position in the Memphis market, where both institutions are based, and would make it the biggest banking company in the state.
Union Planters officials said the deal would bring its share of Memphis- area deposits to 26%, just one point shy of First Tennessee National Corp., now the state's largest bank.
The $3.1 billion-asset Leader, the parent of Leader Federal Bank for Savings, is selling for 13 times its 1995 earnings and two times its book value - a healthy premium for a thrift company. The deal is expected to close in October.
Chairman and chief executive Benjamin W. Rawlins Jr. said Union Planters expects to reduce Leader's pretax operating expenses by about $23 million by yearend 1997. The bank plans to close 20 branches, mostly in the Memphis area, and cut an undetermined number of the combined companies' 5,500 jobs.
Mr. Rawlins said he expects to reduce the work force through attrition, which runs about 20% a year. He said Union Planters currently has 140 openings that would not be filled.
About half of the cost cuts would come from branch closings. Mr. Rawlins said he also expects to get "meaningful savings" in data processing and mortgage servicing.
Mr. Rawlins said the main impetus for the acquisition is to gain parity with First Tennessee in Memphis, where Union Planters has a third of its assets. Mr. Rawlins said the acquisition would be accretive to earnings by the first quarter of 1997.
He also said the combined company would be the No. 1 mortgage originator in Memphis.
Leader's chairman and chief executive, Edgar Bailey, 69, plans to retire in 1998, but would be vice chairman of the combined company until then. The thrift's president, Ronald Stimpson, would become senior executive vice president and administrative officer, ranking third in the hierarchy behind Mr. Rawlins and Jack Moore, Union Planters' president and chief operating officer.
Kay C. Lister, an analyst with Keefe, Bruyette & Woods Inc., said she was surprised by the timing of the deal, but not by Leader's being bought out. "It's a good deal," she said. "It's a fair price for Leader, a very well-run company."
Both Memphis and Nashville are attractive banking markets where few out- of-state banks have entered, Ms. Lister said. In Memphis, only NationsBank Corp. of Charlotte, N.C., and Boatmen's Bancshares of St. Louis are present, with a combined deposit share of 7%.
Union Planters has been an active acquirer, expanding in Alabama, Arkansas, Kentucky, Louisiana, Mississippi, and Missouri. Its last acquisition, of $980 million-asset Capital Bancorp. of Cape Girardeau, Mo., was completed Dec. 31.
But the Tennessee company could be a takeover candidate itself. Analysts have predicted for the past couple of years that Union Planters, Leader, and First Tennessee would eventually be swallowed up.
Mr. Rawlins refused to answer questions about the bank's continued independence. "We work for the shareholders," he said. "As a team we will continue to enhance Union Planters' leadership role in the national financial arena."
