Banc One, Mellon Also Spurn Bank Of Boston

Bank of Boston Corp. entered last weekend close to a merger agreement with CoreStates Financial Corp., but by Monday CoreStates and two other suitors had turned away from any potential deal.

Bank of Boston's negotiations with CoreStates, under heavy fire from shareholders and analysts, were ended late Saturday.

A bid by Banc One Corp. to pay a slight premium also was withdrawn, and Mellon Bank Corp. said it was no longer pursuing the $45.3 billion-asset Boston bank.

But there were still rumors of possible interest from BankAmerica Corp., NationsBank Corp., and perhaps even Canadian banks.

The latest spurning of Bank of Boston, which had been left at the altar several times before, raised serious doubts about both the merger-of-equals approach and Bank of Boston's prospects of finding a partner.

The bank has insisted on keeping its headquarters in Boston and otherwise maintaining its corporate identity on a par with any merger partner.

But analysts said that for such an arrangement to work, a merger would have to offer cost-cutting opportunities that did not exist for CoreStates and Bank of Boston, which have little geographical or line-of-business overlap.

"The market is looking a bit askance at a merger of equals where there doesn't seem to be a clear strategic rationale," said Francis X. Suozzo, a bank analyst at S.G. Warburg & Co.

The stock market reacted negatively last week to news of the CoreStates- Bank of Boston talks, in contrast to the mixed-to-favorable reception of the First Chicago Corp.-NBD Bancorp merger of equals the week before.

With the demise of the negotiations, Bank of Boston's share price rebounded $1.875 to $42, and CoreStates rose $1 to $34.875.

PaineWebber Inc. analyst Thomas McCandless restored his "buy" rating on CoreStates after lowering it to "attractive" on Friday.

While the proposed merger was labeled a defensive move for both CoreStates and Bank of Boston - each an object of takeover speculation - Mr. McCandless does not believe CoreStates, given its 1.8% return on assets, is under great pressure to find a partner.

"How can you take over a company with 180 basis points on assets?" Mr. McCandless said. "CoreStates hasn't begun to see the benefits of its restructuring process."

As merger rumors continued to fly, there was some concern that the "public drama" that accompanied Bank of Boston's talks with CoreStates might repel other suitors, said Arthur L. Loomis 2d, president of Northeast Capital and Advisory Inc., an Albany, N.Y., investment banking firm.

Morgan Stanley & Co. analyst Dennis Shea said a Banc One acquisition of the Boston bank would have "made a lot of financial sense at $45" a share, $7 more than the CoreStates price, but he said their business mix didn't make strategic sense.

"It's not good for the industry to have these kinds of failed deals," said Nancy Bush of Brown Brothers Harriman. Nonetheless, she said, "I'm glad there was a merger of equals that was squelched."

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