Banc One Corp.'s purchase of Louisiana's Premier Bancorp clears the way for the Columbus, Ohio-based bank to pursue other deals and gives Premier shareholders a chance to benefit from any appreciation in Banc One stock.
The transaction, announced late Wednesday, also gives Banc One "very low-cost deposits and a very good position" in Louisiana, according to Interstate Johnson Lane analyst John Mason.
The deal unfolded pretty much as Wall Street had expected: $5.5 billion- asset Premier received a higher price than was due under a 1991 option agreement, although the extra compensation turned out to be a tad lower than some analysts once hoped.
"It's reasonably satisfactory," said Legg Mason's David B. Sochol. "The deal pricing was certainly good from Banc One's perspective."
Banc One said it would purchase Baton Rouge-based Premier for $20.15 a share in stock, or 1.4 times book value, at a time when two times book is the norm. The 1991 agreement was based on a 125% of book exchange ratio.
"We were able to increase the original offer price based on the outstanding job Premier has done improving both the credit quality and performance of their franchise," said Banc One chairman and chief executive John B. McCoy.
Premier chairman and CEO G. Lee Griffin said he was satisfied with the 16% higher price negotiated with Banc One, whose stock has lagged in the wake of disappointing 1994 earnings.
"We would anticipate the value of their stock going up and we would benefit," said Mr. Griffin, who plans to stay on with the new Banc One Louisiana Corp. when the transaction closes in the fourth quarter.
When the two banks signed the 1991 agreement, Premier was reeling from loan losses and in some danger of going under. In return for a $65 million capital infusion, Premier gave Banc One an option to purchase it sometime between June 30 of this year and March 1997.
Analysts had expected Banc One to pay a higher price than required in order to compensate Premier for recent acquisitions. But Banc One treasurer George Meiling denied that his company made any explicit promises. The Federal Reserve Board, when it approved the original option agreement, required Banc One to take a hands-off approach to Premier.
"We were not managing them, not running them," Mr. Meiling said. "They made decisions that were in their strategic best interests, not necessarily their tactical best interests."
Mr. Meiling said Banc One decided to exercise the option now because "everything being equal, the deal gets more expensive with the passage of time."
Perhaps more important, the uncertainty over Premier created an obstacle to Banc One doing other deals. Banc One repurchased 18 million shares last year to use in the Premier buyout. Under the accounting rules, this buyback could have prevented Banc One from doing another large pooling-of-interests transaction.
