SAN FRANCISCO - In a deal that will make it a major player in Texas, BankAmerica Corp. has agreed to buy most of the operations of Dallas-based First Gibraltar bank.
BankAmerica will pay First Gibraltar's owner, MacAndrews & Forbes Holdings Inc., about $110 million in cash and stock to acquire 130 branches and about $7.5 billion in deposits.
That represents a premium of roughly 1.5%, a spokesman said. The final purchase price will be based on a complex formula linked to interest rates and several other factors.
Gains for McAndrews & Forbes
Following the acquisition, BankAmerica's Texas unit will have nearly 260 retail offices and about $11 billion in deposits. That will give the company the second-largest branch system and make it the fourth-largest deposit holder in the Lone Star State.
MacAndrews & Forbes, a private company controlled by investor Ronald O. Perelman, will keep most of First Gibraltar's assets, its mortgage company, and a unit that sells problem assets for the federal government. It will also keep First Gibraltar's federal savings bank charter and four branches.
A MacAndrews spokesman declined to explain why the group is keeping the charter, assets, and operations.
But sources familiar with the deal said the terms reflect MacAndrew's desire to preserve the tax advantages and other benefits it got when it bought First Gibraltar from the federal government.
First Gibraltar is a savings bank made up of five failed thrifts that regulators combined and sold to MacAndrews for about $315 million in 1988.
Hefty Profits for Perelman
As part of the agreement, the Perelman group got roughly $900 million in tax breaks plus loan-servicing agreements and contracts providing guaranteed yields on problems assets.
Although Congress later forced regulators to trim the deal's benefits, it still has provided hefty profits.
While the sales price to BankAmerica is relatively low, the Perelman group's ultimate return on investment will be substantial when benefits and proceeds of an expected sale of the mortgage unit are considered.
Because MacAndrews is privately held, analysts said they are unable to calculate the return precisely. "But it's been lucrative," said Frank W. Anderson, an analyst with Stephens Inc., Little Rock, Ark.
Tough Negotiating Stance
Sources familiar with the negotiations said the Perelman group's insistence on preserving its benefits made the talks longer and harder than BankAmerica expected.
"There was a discussion about every word in the agreement," said one source. "Up until Friday, they were still haggling about whether the price would appear in the release."
On MacAndrew's demand terms were not disclosed in the acquisition announcement, although BankAmerica has made them available.
Priority on Texas
After completing its acquisition of Security Pacific Corp. earlier this year, BankAmerica has said that building its Texas unit is its top expansion priority.
Buying First Gibraltar's branches and deposits triples the size of BankAmerica's Texas unit, which is currently an also-ran among banks in the state.
However, the company is buying only $640 million of First Gibraltar's consumer loans and $225 million of its business and commercial real estate credits.
So while BankAmerica will finally be operating on the scale it has wanted, it faces a tough challenge to turn a motley assortment of failed thrift branches into a profitable commercial bank.
Specifically, it will be short of loans and lack an adequate commercial lending infrastructure.
Larry McNabb Tapped
"This is a long-term investment," said Lawrence Cohn, analyst with PaineWebber Inc. "It's difficult to see any nearterm payoff."
To run the Texas unit, BankAmerica has tapped Tennessee native and consumer banking specialist Larry McNabb, who is currently supervising the consolidation of the BankAmerica and Security Pacific Corp. branch banking operations.
Formerly head of BankAmerica's California branch system, which he describes as "one of the most fun jobs I ever had," Mr. Mcnabb, 43, is considered a rising star in the company.
But he lost the California branch job to Liam McGee, another young executive who had previously served as head of Security Pacific's California branch operations.
The only other Bank of America Texas appointment announced so far is David Berry, 41, currently chairman and chief executive who will become president and chief operating officer.
Emphasis on Retail
Mr. McNabb said BankAmerica's retail and small-business emphasis in Oregon and Arizona are "good models" for what the company will do in Texas.
In Arizona and Oregon, the company has concentrated on building retail operations but has yet to make serious inroads in the business banking markets.
First Gibraltar's two top managers, chairman and chief executive Gerald J. Ford and president chief operating officer Carl B. Webb, have not yet announced their plans, a company spokesman said.