U.S. Bancorp last week said that it would consider a merger of equals, triggering speculation that the top candidate would be Milwaukee's Firstar Corp.
Each is headed by a Grundhofer brother: 61-year-old John F. at U.S. Bancorp and 54-year-old Jerry A. at Firstar.
Analysts said there are a limited number of prospects to team up with Minneapolis-based U.S. Bancorp, which has a market capitalization of $25 billion and assets of $77 billion. Aside from Firstar they include $92.8 billion-asset SunTrust Inc. in Atlanta and $65.8 billion-asset Wachovia Corp. of Winston-Salem, N.C.
But Firstar is considered the likeliest partner. "Both companies are certainly well managed and have a shareholder focus," said Joseph Duwan, a banking analyst at Keefe, Bruyette & Woods Inc. "It would be quite a powerhouse in terms of franchise and financial performance."
U.S. Bancorp's potential interest in finding a merger partner was disclosed last week by Philip Heasley, its president, during a conference call with investors sponsored by Lehman Brothers. Mr. Heasley stressed that no deal was on the horizon but said the idea warrants exploration.
Analysts participating in the call said they were not surprised by Mr. Heasley's remarks. They said U.S. Bancorp is among the best positioned and capitalized banking concerns in the nation.
"They've always been a company open to opportunity if it made sense for shareholders," Mr. Duwan said.
Denis LaPlante, a banking analyst at Fox-Pitt Kelton, said, "Everyone talks about the brothers getting together at some point."
Remarked Nancy Bush, a banking analyst at Ryan, Beck & Co. in Livingston, N.J.: "Would we see one Grundhofer brother succeeding the other?" If so, "what role would Phil Heasley play?"
Several analysts said there is good reason for another wave of megamergers. "There are still efficiencies that could be achieved with additional critical mass," said Frank Barkocy, senior analyst at Keefe Partners. "You're also seeing situations where banking companies are running up against revenue walls and need to be consolidated."
Wachovia and SunTrust are considered possible merger partners because both are well-run, very profitable institutions, much like U.S. Bancorp. Both would extend U.S. Bancorp's geographic reach, the analysts said.
Mr. Barkocy also mentioned Bank One Corp., with its earnings woes, as a prospect for merger with U.S. Bancorp. "The discipline of U.S. Bancorp would probably work well within their franchise," he said.
