Amsouth Bancorp. left observers wondering if it overreached with a deal Tuesday to buy First American Corp. for $6.3 billion.

The Birmingham, Ala., banking company's assets would double, to $40 billion. The merger is expected to close in the fourth quarter.

Amsouth is paying a 30% premium over Friday's closing share price for First American, a Nashville company that stumbled in its May 1998 purchase of Deposit Guaranty Corp. Now the pressure is on Amsouth to show that it won't fall into the same trap.

"First American is 10 times larger than any prior merger that (Amsouth has) done," said Michael L. Mayo, a bank analyst at Credit Suisse First Boston. "This deal will create a formidable southeastern franchise, but the question is whether Amsouth has raised the bar too high."

The deal would make Amsouth one of the largest banking companies in the Southeast, with a market capitalization of $11 billion, 680 branches in nine states, and a client list of two million households.

The expanded Amsouth would hold a leading market position in Tennessee, Florida, Alabama, and Mississippi, and have a presence in Georgia, Louisiana, Arkansas, Kentucky, and Virginia. Its 1,350 automated teller machines would give it the third largest network in the region, behind First Union Corp. and Bank of America Corp.

"We are not interested in size for the sake of the size," said C. Dowd Ritter, chairman and chief executive of Amsouth, during an analysts' conference call Tuesday morning. The deal would add to Amsouth's earnings immediately, he said, adding "we think that it is a real home run for shareholders going forward."

First American shareholders will get 1.871 share of Amsouth common stock for each common share of First American.

Mr. Ritter would be president and chief executive officer of the combined company. Dennis C. Bottorff, chairman and CEO of First American, would be chairman until Jan. 1. 2001. In addition to Mr. Bottorff, four other First American directors would join the Amsouth board, increasing its size to 17 members, from 12.

Investors and some analysts were skeptical. Amsouth's shares fell 11.66%, to $24.4375, and First American's gained 6.89%, to $43.625.

For Amsouth, "This deal is like moving from Triple-A ball to the majors," Mr. Mayo said. "Their record so far has been quite good, but the challenge will be more difficult."

Its last sizable acquisition was in 1994 when it paid $287.5 million for Fortune Financial, a Clearwater, Fla., thrift.

Mr. Mayo downgraded First American to a "hold" recommendation, from "buy," because of his concerns.

John Moore, a bank analyst at Wachovia Securities, also questioned the deal.

"I'm still trying to figure out who is buying whom," said Mr. Moore. "First American is picking up 55% of the company, while Amsouth is picking up 45%, and because First American is a larger percentage I don't know if I can take Amsouth's ratios and apply them to First American."

Amsouth anticipates the deal will add 2.5% to earnings in 2000 and 9% in 2001. The company said it would cut First American's expenses by 18% and boost its revenue by 5%. The company also expects to get 75% of savings in 2000.

"This deal looks like a merger of equals, and it much more difficult to achieve the kind of synergies and cost cuts that they are talking about," said Mr. Moore. "The deal may be much more difficult to integrate than they expect.

"The Queen Mary take takes a 10-mile radius to make a U-turn," he said. "And this deal has one Queen Mary buying another Queen Mary."

Mr. Moore also said he is tempted to dismiss the revenue enhancements which the company said that it would achieve. First American's key markets in Tennessee and Mississippi are weaker than Amsouth's key market, which is Florida, he said.

Amsouth also has to worry about retaining its customers, analysts said.

"Amsouth was a low-risk, internal growth story," said Lori Appelbaum, bank analyst at Goldman Sachs Group. "But now you have integration risk. Hopefully the earnings streams that they are buying is what they get given the customer attrition levels at First American."

First American itself lost customers in banks it acquired, particularly in the Deposit Guaranty deal, they noted.

The price First American paid for the Jackson, Miss., company-$2.44 billion-drew criticism from analysts and investors from the get-go. When the company failed to deliver on the promised cost savings and revenue increases, the chorus of complaints grew louder.

"Deposit Guaranty was the worst deal in the history of bank mergers," said Sean J. Ryan of Bear, Stearns & Co. "First American paid 25 times earnings for Deposit Guaranty, and now they are effectively selling those earnings at 17 or 18 times."

For Amsouth, he said, "this is a good acquisition at a good price."

"This is just one more example of the new paradigm in bank mergers," Mr. Ryan said. "Instead of big banks buying small banks it is best management buying weaker managements so it creates value for shareholders on both sides."

Amsouth expects merger charges of $296 million. "Most of it will be incurred in the fourth quarter and the rest is likely to come in the second quarter in 2000," said Sloan D. Gibson, chief financial officer.

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