Banc One Corp. said Tuesday it plans to buy First Commerce Corp. in New Orleans for $3.1 billion.
The deal was unveiled after rumors of it prompted the New York Stock Exchange to suspend morning trading in First Commerce stock. The price amounts to 3.5 times book value and 22 times this year's expected earnings at First Commerce.
It would be the highest price ever paid by Banc One, the Columbus, Ohio- based superregional, for another bank. But the price tag is typical of recent major acquisitions in the industry.
Few observers were surprised by the announcement. The New Orleans bank has long been viewed as a takeover target, and Banc One is building on an established presence in the Louisiana market.
"This is an important affiliation for us, given our stated objective of being one of the top three banks in markets we serve," said Banc One chief executive officer John B. McCoy. The company ranks No. 1 in Arizona; No. 2 in Ohio, Indiana, Kentucky, and West Virginia; and No. 3 in Wisconsin, Oklahoma, and Texas.
Analysts and investors noted that the acquisition would offer considerable cost savings and would vault Banc One into the No. 1 position in Louisiana.
The deal gives Banc One "27% statewide market share in Louisiana," said banking analyst Robert B. Albertson of Goldman, Sachs & Co., New York.
"Banc One has got its eye focused on the ball game for continued fill-in acquisitions as opposed to any grand strategic moves," he added. Two years ago, Banc One bought Premier Bancorp, Baton Rouge, after establishing a stake in the company several years earlier.
Banking analyst Michael Granger of Fox-Pitt Kelton pointed out that a further move into Louisiana is a good one right now for the superregional.
"Louisiana has been strong economically in the last five years as far as loan growth," Mr. Granger said. The economics of the state have been driven by a number of factors-notably tourism and advances in technology.
First Commerce's chief executive, Ian Arnof, said his company decided to sell shortly after NationsBank announced last month that it was buying Barnett Banks Inc., Jacksonville, Fla.
NationsBank bought Boatmen's Bancshares for 3 times book and Barnett for 4.1 times, while First Union bought Signet Bank for 3.5 times book, Mr. Arnof noted. "The price of acquisitions was escalating so quickly that we felt the time was right for us to sell."
Layoffs are expected, although officials at both companies said a specific number has yet to be decided on. Mr. Arnof, 58, added that timing of the merger was excellent, considering that "The Navy has opened a huge center here where the lowest salary job is $50,000. We have been working with them so that our folks can easily apply" for data processing and other positions.
A proposal to sell the company was presented to the executive committee of the board last month and to directors on Oct. 13, added Mr. Arnof, who will remain with the newly merged company as chairman of Banc One Louisiana.
First Commerce's share rose more than 14% in Tuesday trading, while Banc One's stock fell almost 3%.
The stock of other Louisiana banks ran up on the news. Shares of Hibernia Corp., a $9.3 billion asset bank in New Orleans, rose 56.2 cents, to $18.125, while shares of Whitney Holding Corp., a $3.7 billion-asset bank, grew $1.0625, to $51.