John B. McCoy says he is off the acquisition trail-at least for the next 18 months.
The chief executive officer of Banc One Corp. said in an interview this week that he does not plan to do any big deals while his company is busy digesting First Chicago NBD Corp.
If Banc One were to move too soon, he said, it could become vulnerable to a takeover.
"I will do much better by my shareholders by not piling on another merger," he said, though he did not rule out purchases of less than mega proportions.
Well aware that peers such as Norwest Corp. and NationsBank Corp. have taken merger steps that would double their size, Mr. McCoy said his priority for the next year and a half is not to add more mass. He is focused on the pending $30 billion acquisition of First Chicago. It would double Banc One's assets to about $230 billion, 20% larger than the Norwest-Wells Fargo & Co. combination.
"One of the key things you have to do is integrate," Mr. McCoy said.
Otherwise, banks risk alienating customers and losing revenues, as Wells Fargo did when it tried to absorb First Interstate Bancorp too quickly.
"It's the best example of 'better do it right and don't screw it up,'" Mr. McCoy said. "Whoever thought Wells Fargo, when it bought First Interstate, would later be the next big takeover?"
Mr. McCoy is not taking Columbus, Ohio-based Banc One out of the acquiring business entirely. He said he is still interested in banking companies with $5 billion to $10 billion of assets or a small nonbank company.
"I have no expectation for the next 18 months we would do any deal of size," he said. "Does that prevent us from buying a $5 billion bank? I don't think so, especially if it gives us market synergies.
"But a $20 (billion) to $25 billion bank? Not in the next 18 months."
Some Banc One watchers doubt Mr. McCoy can sit on the sidelines that long. Anthony Polini, an analyst with Advest Group Inc. in New York, said Banc One will integrate First Chicago more quickly than Mr. McCoy is predicting. The deal is scheduled to close in the fourth quarter, and Mr. Polini expects Mr. McCoy will be hungry for more.
"I'd be surprised if the new Banc One wasn't an active acquirer," Mr. Polini said. "The bottom line is (Mr. McCoy) has always been acquisition- driven."
Mr. McCoy, who is to be president and chief executive officer of the new Banc One, might look to go east through PNC Bank Corp., Pittsburgh, or BankBoston Corp., Mr. Polini said. Or he might choose a midsize midwestern company such as Firstar Corp., Milwaukee, or Mercantile Bancorp., St. Louis.
Of the recent wave of big mergers, Mr. McCoy said, "When someone does a transaction, it gets everyone thinking. It does create a thought process." He said NationsBank's January 1998 purchase of Barnett Banks Inc. in Florida "caused a lot of people to say, 'What are we doing?'"
Mr. McCoy said he would have liked to have gotten Barnett, but not at the $15.6 billion price NationsBank paid.
He said the new Banc One will make acquisitions based on opportunity, not geography. "It depends on what the right transaction is. It's not just, 'I've got to be in Florida.'"
"I'm not sure we have to do anything," he added. "We feel very good about our business, our business plan, and our growth rate. I can sit here and say, 'Let's put these two companies together.'"
Some analysts agree-up to a point.
"If the new bank shows performance measures and growth that's among the best in the industry, then it does not need to feel much pressure to do anything," said Michael Mayo of Credit Suisse First Boston.
But if the new Banc One "winds up a so-so also-ran," a larger bank could come along and buy it, he added.
