PHOENIX -- Banc One Corp. raised more than a few eyebrows on Wall Street in April when it agreed to acquire Valley National Corp. for $1.2 billion in stock.

And for good reason: The rapidly expanding Banc One was paying a whopping premium of more than two times the Arizona company's book value.

But it was unknown, when the data was announced, that Banc One was not Valley's only suitor. In fact, three other major banking companies - Norwest Corp., BankAmerica Corp., and Wells Fargo & Co. - had discussed a possible merger with Valley during the previous nine months, according to sources familiar with the talks.

Testing Waters, and Chemistry

Valley National's negotiations illustrate the elaborate mating dance that can ensue once a large banking company tests the merger waters.

The talks also demonstrate that while price is ultimately the key factor, other elements come into play.

For starters, there was personal chemistry.

Senior officers of $11 billion-asset Valley took an almost instant liking to Banc One's approach to mergers, in which the acquired bank's management generally retains a large degree of autonomy.

By contrast, Valley's management team was put off by Norwest's approach. Richard M. Kovacevich, Norwest's hard-driving president, apparently made it clear that he viewed any deal as a takeover, not a merger.

He also voiced skepticism that Valley had recovered from its credit problems.

Banc One, which will have $71.7 billion in assets when all its pending deals are completed, also benefited from a series of events that caused potential rivals to drop out. BankAmerica, another highly acquisitive banking company, stepped aside after agreeing to acquire California rival Security Pacific Corp.

And Wells Fargo, which expressed an interest in acquiring Valley as early as 1989, was knocked out of the running when it became embroiled in credit and regulatory problems.

The takeover saga began last summer when Valley, parent of Arizona's largest bank, decided to sound out potential merger partners. The company was rebounding from near deadly loan problems caused by the Grand Canyon state's real estate crash.

"The board had not authorized a sale, just a testing of the market," said a source. "And it didn't take a rocket scientist to figure out who the candidates would be."

Valley chairman and chief executive Richard J. Lehmann immediately contacted his counterparts at Banc One, Norwest, BankAmerica, and Wells. (The three latter banking companies declined to comment for this story. Valley officials would not discuss talks with companies other than Banc One.)

Valley's approaches to the four potential buyers were described as exploratory, rather than full-blown merger negotiations.

All four companies expressed interest. Indeed, Wells' chairman and chief executive Carl Reichardt and president Paul Hazen made a pilgrimage to Phoenix to discuss a takeover.

Norwest-Banc One Rivalry

By early 1992, BankAmerica and Wells had dropped out, and talks with Norwest and Banc One moved into a more intensive stage. Norwest's seriousness in turn put the heat on Banc One to nail down a deal.

"Because of the interest of other parties, we got the signal we should get [merger talks] started sooner than we had planned," said William Boardman, Banc One's lead negotiator.

With its shares trading at a lofty 2.4-times book value, Banc One was strongly positioned to make an attractive offer in stock.

By ultimately proposing to swap 1.2 of its shares for each share of Valley, Banc One was putting a $1.2 billion price tag on the deal.

Share-Price Disadvantage

Norwest's stock, meanwhile, was trading at about 1.5 times book value. While it never made a formal offer, it suggested an exchange of stock worth about 1.6 or 1.7 times Valley's book value, giving the deal an indicated value of $865 million to $920 million.

The maneuvering between Norwest and Valley reached its climax when Valley's president and chief operating officer Robert F.B. Logan went to Minneapolis for talks early this year.

Chairman and current chief executive Lloyd P. Johnson, who in the past had been Norwest's point man in major mergers, did not take the lead in bargaining with Valley.

The task fell to Mr. Kovacevich, who will succeed Mr. Johnson as chief executive in January. Mr. Johnson's softspoken, reassuring manner had often helped nail down deals for Norwest.

But Mr. Kovacevich adopted a more aggressive manner, sources said. He was not available to comment.

No one suggests that style issues were decisive. All the same, Valley's management was far more comfortable with Banc One's negotiating style.

What separated Banc One from Norwest was "the difference between being treated as a major leaguer or a minor leaguer," said a source familiar with the talks.

Later, Banc One and Valley reached agreement during a series of meetings culminating April 10 at Banc One's headquarters in Columbus, Ohio.

Mr. Boardman and Mr. Logan sketched out economic terms. Then Mr. Lehmann and Banc One chairman and chief executive John B. McCoy stepped in to seal the deal.

Four days later, the engagement was announced. The wedding is expected in January.

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