First Union Corp. and First American Corp. announced thrift acquisitions last week to fill gaps in parts of their regional banking networks.
First Union, based in Charlotte, N.C., reached an agreement to acquire United Financial Corporation of South Carolina Inc., Greenwood, for $130.5 million. United Financial is the holding company for two thrifts that have total assets of $759 million and 16 offices, mostly in the Palmetto State's Piedmont region.
Nashville-based First American said it would pay $89 million to acquire Heritage Federal Bancshares of Kingsport, Tenn. Heritage Federal has $520 million of assets and 13 offices in east Tennessee.
Both are stock deals at relatively high premiums over book value: 1.9 times in First Union's case, 1.8 in First American's.
United Financial also negotiated a "collar" that increases the dollar value of the exchange ratio if First Union's stock falls below a certain price.
Each acquirer justified its deal as an in-market merger that would lead to considerable cost savings.
First Union said it would cut about 40% of United Financial's $13 million in annual expenses. First Union also said the deal would be accretive to its earnings in 1996.
First American said it expects to save $6 million from the consolidation of up to 10 of the combined companies' 33 offices in east Tennessee. It also predicts the deal will be anti-dilutive in the first year after closing, which should occur in the fourth quarter.
First Union's purchase of United Financial does not affect its overall No. 4 market ranking in South Carolina. But it will provide an entree into Greenwood, with the top deposit share, and move it from third to first place in York County, which includes Rock Hill.
"It will give us improved market share in two significant areas," said Sid Tate, chairman and chief executive officer of First Union's South Carolina subsidiary, which has $3.1 billion of assets and 66 offices.
First American's purchase will give it the leading market share in east Tennessee's Sullivan County (Kingsport) and the second largest in nearby Anderson and Roane counties. First American has $7.8 billion of total assets.
The sale of United Financial marks another victory for South Carolina investor H. Jerry Shearer and his partner Jerry Zucker. In recent years, Mr. Shearer and Mr. Zucker have taken positions in three South Carolina thrifts - including United Financial - and subsequently pressured management to sell.
Through their company, Columbia-based Mid-Atlantic Investors, Mr. Shearer and Mr. Zucker purchased 9.9% of United Financial last May and promptly announced their intention to oppose its pending merger with Greenville-based American Federal Bank. The two thrifts announced a "merger of equals" pact the previous April.
Mid-Atlantic Investors sent United Financial shareholders a letter arguing that they would get a better return if the S&L was purchased outright by a commercial bank. United Financial called off the American Federal deal in August when it was clear its shareholders would not approve the transaction.
"I'm pleased as punch," Mr. Shearer said last Thursday, a day after the First Union announcement. "Management in a lot of these institutions think they have a little fiefdom and haven't had to contend with shareholder activism.
"I think we're showing there's a lot of hidden value out there if people just realize it."
United Financial president and chief executive officer Lynn W. Hodge agreed Mr. Shearer's activism "influenced" the sale, and said he was satisfied with the outcome. "We did give up control, but we did it at the right price," Mr. Hodge said.
Mr. Shearer said his next target is Augusta, Ga.-based Bankers First Corp. Mid-Atlantic Investors took its customary 9.9% stakeout last March and has been militating for a sale ever since.