To buy back stock and shore up its share price, Associated Banc-Corp said it would convert a pending acquisition deal from a pooling transaction to a purchase.
The new accounting method-for Associated's $89.1 million deal for Riverside Acquisition Corp. of Minneapolis-would let the Green Bay, Wis.- based company repurchase up to 2.8 million of its own shares.
"Fewer outstanding shares should help our earnings," said Jonathan E. Drayna, an Associated spokesman. "Hopefully it will also provide some stability in our stock price over the long run."
Without the switch to a purchase, Associated would not have been allowed to buy back stock until February 2000, executives said.
The move comes just as rumors about a possible sale of Associated are dying down.
According to analysts, San Francisco-based Wells Fargo & Co. made an unsuccessful bid of $48 a share for the $11.3 billion-asset company this month. Officials from both Associated and Wells refused to comment.
Associated has been struggling with its October acquisition of First Financial, a Stevens Point, Wis., thrift.
According to Gerry Cronin, a bank analyst with McDonald & Co. Investments in Cleveland, Associated is unlikely to agree to a sale until it has cleared up the problems with First Financial. That could take at least four months, he said.
"My gut (reaction) is they're not selling," Mr. Cronin said. "But the fourth quarter is going to be a very telling quarter."
The takeover speculation pushed Associated's shares up, but only temporarily. The stock reached $43.0625 Friday, a 27% gain from the first week in June. Shares were down $3.1875 at Monday's close, to $39.1875.
Because of the accounting switch and the merger run-up in Associated's stock price, Riverside will get fewer shares in the fixed-price deal, said Wayne R. Bopp, an analyst at Robert W. Baird & Co. in Milwaukee.
"If you're Riverside, you're furious," he said. "They wanted to get those shares back in December when they were cheap. Now if Associated gets taken over, there's no upside."
But David Cleveland, Riverside Bank's president and chief executive officer, said his company is committed to the merger plans.
"This change makes no difference to Riverside Bank," he said. "We discussed it at our board meeting on Monday, and the change was approved unanimously."
