In a deal that will make it the biggest player in Kentucky, Banc One Corp. on Wednesday agreed to buy Liberty National Bancorp of Louisville for about $785 million in stock.

Combined with Banc One's current operations in Kentucky, the deal will give the Columbus, Ohio-based company a total of $6.5 billion of assets and 131 branches in the Bluegrass State.

The banking operations will be folded into a new subsidiary, Banc One Kentucky Corp., to be headed by Malcolm B. Chancey Jr., the Louisville company's chairman and chief executive. The deal is set to close at the end of 1994's second quarter.

Lengthy Courtship

John B. McCoy, Banc One's chairman and chief executive, said in an interview that statutory limits on deposit market share in Kentucky would prevent further large takeovers in that state, but he said Banc One still would seek mergers with community banks.

Mr. McCoy said Banc One and Liberty had held sporadic talks for almost a decade, but that the deal gained momentum six weeks ago when Liberty management conducted a strategic analysis of the company and opted to sell. Several sources said Detroit-based NBD Bancorp had also been interested.

Based on Banc One's closing stock price Wednesday, the deal's value is equal to two times Liberty's book value and nearly 16 times its annualized earnings for the first nine months of 1993.

Banc One Shares Drop

Liberty, which has $4.8 billion of assets, is healthy. But Banc One's stock on Wednesday dropped by 87.5 cents a share to a 52-week low, closing at $36.625. Liberty shares rose by $1.375 to $29.375.

Concerns about potential management strain and short-term dilution are not new.

What is new is concern about a key merger assumption: that acquirers can maintain or even boost revenues of their prey while sharply lowering operating expenses and increasing efficiency.

Investors Losing Faith

But Smith Barney Shearson analyst Henry C. Dickson is among several analysts who say such concerns are overblown.

Mr. McCoy said in an interview that loans have been growing at a 10% annualized clip at Banc One, and he said "the market is going to extremes" in its doubts over bank stocks.

In the meantime, said Chicago Corp. analyst Kenneth Puglisi, Banc One's weakening trading value leaves Liberty's management in the position of accepting an offer that appears somewhat modest in the short run.

"Obviously, Liberty's management believes Banc One's stock is undervalued," said Mr. Puglisi, who recently published a research report drawing the same conclusion.

Liberty earned $37.5 million during the nine months ended Sept. 30, for annualized returns of 1.07% on average assets and 13.5% on average equity. The company finished the third quarter with a modest $24.3 million of problem loans that equalled 0.7% of total loans.

Denis Laplante, a banking analyst with Fox-Pitt Kelton Inc., said Liberty has a strong consumer orientation that will fit well with Banc One. Fox-Pitt Kelton analyst Michael Granger said there would be insignificant" earnings dilution of Banc One shares.

The two other large players in Kentucky are PNC Bank Corp., Pittsburgh, and National City Corp., Cleveland, both of which bought large Kentucky banking companies several years ago.

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