BankAmerica Agrees to Buy Nevada Bank for $400 Million

SAN FRANCISCO - Showing a willingness to pay a healthy premium to expand, BankAmerica Corp. has agreed to buy Valley Capital Corp. of Nevada at almost twice its book value.

BankAmerica agreed to an exchange of stock worth $400 million, or about $37.10 for each Valley share. The price is 92% higher than Valley's $19.24 book value and 30% higher than its closing market price on Wednesday, just before the announcement of the definitive agreement.

Valley Capital's stock shot up $5.50 a share Thursday, or 19%, to $34. BankAmerica was up 62.5 cents to $35.50.

Under the terms of the agreement, Valley Capital has the option of collecting $360 million in cash if the exchange value of BankAmerica's stock at closing falls below that figure.

Las Vegas-based Valley had announced on Tuesday that it was in discussions with a suitor, though it did not name BankAmerica. On Monday, before the announcement, its shares closed at $23.

Valley Capital, which has $3.2 billion in assets, would be the first BankAmerica acquisition in more than a year without federal government assistance. The $113.2 billion-asset BankAmerica has spent about $375 million in the last year and a half to buy 10 failed thrifts and one failed bank.

BankAmerica officials have said they prefer federally assisted deals because they protect the company from credit risk by allowing it to refuse loans it considers risky. But the officials also have noted that the company's strategy requires it to be among the market-share leaders in the places where it operates.

In the Valley Capital case, BankAmerica demonstrated it will buy going concerns to meet market share goals.

No. 2 in Nevada

Valley Capital is the parent of Valley Bank of Nevada, the second-largest bank in the state, trailing only a First Interstate Bancorp subsidiary with $3.7 billion in assets.

Valley Bank of Nevada had $2.9 billion in assets and 64 branches as of June 30. Another Valley Capital subsidiary, Caliber Bank in Arizona, had $233 million in assets and nine branches.

The parent earned $36.9 million in 1990 for a 1.21% return on assets. Income for the first six months of 1991, at $12.1 million, for a 0.79% ROA, was off 32% from a year earlier.

"Opportunities to find healthy institutions that fit well with our strategy are things we're interested in," BankAmerica chief financial officer Frank N. Newman said in an interview.

Other Deals Weighed

The company is considering unassisted acquisitions both to enter markets where BankAmerica currently does not operate, and to grow in places where its presence is small, Mr. Newman said.

To fund expansion, BankAmerica has raised about $1 billion in capital during the last year through half a dozen preferred stock and subordinated debt issues. "As a practical matter, there is nothing we would be interested in buying that we would not have the capital for," Mr. Newman said.

BankAmerica is currently negotiating to buy HonFed Bank, Hawaii's largest thrift with $3 billion in assets, according to sources close to the talks.

A Look at First City

And in what would have been an expansion of its Texas toe-hold, the company reportedly examined the books of the troubled First City Bancorporation of Texas. Last year, BankAmerica reportedly held inconclusive talks with Valley National Corp., Phoenix, about buying the company's Utah unit.

BankAmerica declined to comment on any of the discussions.

Valley Capital - which is unrelated to Valley of Arizona - is "very expensive, but it's a good deal," said Campbell K. Chaney, analyst with Sutro & Co., San Francisco. "It gives [BankAmerica] a dominant position in the state."

No sizable, failed thrifts were available in Nevada. And besides Valley Capital, "there is no freestanding banking operation of any size," said Kenneth E. Miller, the company's chief financial officer.

The combined operation will be managed by Valley Capital's current management, BankAmerica said.

PHOTO : Multistate Empire Source: BankAmerica Corp.

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