Central Fidelity Banks Inc. has attracted renewed attention as a possible takeover target, following the death last week of the Richmond, Va., banking company's chairman and eo-CEO, Carroll L. Saine.
Mr. Saine, a staunch defender of the bank's independence, died Thursday after a battle with lung cancer.
Central Fidelity's stock price immediately surged over $2 a share Thursday to a 52-week high of $34.25 in heavy trading. The stock gave back 25 cents a share Friday, closing at $34 in continued heavy trading.
The $9.4-billion-asset company could fetch as much as $1.6 billion, according to analysts.
They said Mr. Saine had made no secret of the fact that he would resist all overtures for Central Fidelity, regardless of Virginia's interstate banking law, which was passed in July.
Lewis N. Miller, Central Fidelity's president, who was coCEO with Mr. Saine and is likely to succeed him as chairman, is publicly embracing that sentiment.
A company spokeswoman said the bank's strategic direction has not changed, and that Mr. Miller is just as committed to maintaining its independence.
Said one analyst: "He is a young man, and it is rare for a new, young CEO to do something precipitous right out of the gate. Normally they want to run the company for a while."
But some observers also said it is unlikely that he can convincingly duplicate Mr. Saine's animated rejection of potential suitors.
"Carroll was the embodiment of the company," said one analyst, who requested anonymity. "He was about as emotional and adamantly opposed to any kind of strategic combination as any CEO I have known personally. By definition, Lewis has got to have his eyes more open."
Central Fidelity, like other Virginia banks, has been the subject of periodic merger speculation since it became apparent last year that the state legislature would pass an interstate banking law. So far, though, there's been little activity.
Analysts said potential suitors include PNC Bank Corp., Banc One Corp., Wachovia Corp., First Fidelity Bancorp. and First Union Corp.
But those potential buyers will have to see their own stock prices rise before tackling the regional Virginia banks, said David M. West of Davenport & Co.
Because of those rumors, most Virginia bank stocks have already seen a speculative run up, said David Stumpf at Wheat First Butcher & Singer.
"Some of the stocks have given up despite the changing in the law," he said.
"Maybe in the future Virginia will be a hotbed of activity, but not overnight."
Under Mr. Saine, Fidelity became one of the most efficient banks in the country, consistently ranking among the best in the nation.
Teamed with Mr. Miller, Mr. Saine's cost-cutting became legendary, even going so far as to eliminate the company's $150,000 budget for watering and caring for plants.
Central Fidelity's retail system, however, is not as strong as that of some of its competitors, an investment banker said.
As a result, Fidelity would not be a good entry into the state, he said. And one bank that is already there, BB&T, which has expressed an interest to expand its Virginia operations, is already busy completing its merger with Southern National, he said.
NationsBank Corp., which has the top spot in Virginia in terms of market share, would likely run into regulatory hangups if it tried to acquire Central Fidelity, analysts said.
As a result, most analyst agreed that at least for the next year, not much will change for Central Fidelity.
"The biggest question may be: Will Lewis get more aggressive by acquiring, to the extent that he will abandon Fidelity's Virginia-only strategy?" said Mr. West.
Except for a recent minor Resolution Trust Corp. acquisition, Fidelity has been content to expand exclusively in its home market in Virginia, he added.
