Compensating for a trading decline, Banc One Corp. agreed to boost the number of shares it will offer in the stock-swap acquisition of Liberty National Bancorp, Louisville, Ky.
Columbus, Ohio-based Banc One said it will pony up an extra 914,000 shares, 3.8% more than originally envisioned, to complete the purchase of the $ 5 billion-asset Liberty.
The $823 million deal is at 197% of Liberty's book value. It is set to close Aug. 15. Banc One's stock fell 62.5cents on Friday, closing at $32.375.
Merrill Lynch's Sandra Flannigan said the financial impact of the sweetened offer is manageable for Banc One.
Banc One's market troubles largely stem from a derivatives strategy that has liabilities repricing more quickly than assets in an era of rising rates. The bank's second-quarter net interest margin fell 63 basis points from a year ago, to 5.51%.
Nebraska Purchase Scrapped
Banc One earlier had canceled the purchase of Firstier Financial Inc., Omaha, saying an exchange ratio hike would cause dilution.
But Banc One said it has more room to stretch with Liberty, citing consolidations with existing Kentucky facilities.
"We think there are more than enough synergies to justify the extra we had to pay," said John B. McCoy, chairman and chief executive of Banc One.
George Meiling, Bane One's treasurer, said the company would incur "minimal" initial dilution. He said the deal would be aceretive to earnings per share by the second half of 1995.
Banc One is projecting a $50 million, or roughly 30%, cut in Liberty's annual overhead.
Anthony Davis, a banking analyst with Dean Witter Reynolds Inc., said investors remain somewhat cautious about Banc One, fearing that a derivativeselevated exposure to rising rates would more than offset forthcoming overhead cuts.