Seeking to broaden its fee-based revenues, Texas Commerce Bancshares said Tuesday that it will buy a Dallas-based trust company from Cleveland's Society Corp. for about $130 million.
Under the deal, Texas Commerce, a subsidiary of Chemical Banking Corp., will add $5.5 billion assets under management to its own portfolio of $8.5 billion of trust assets under management.
It also will inherit 11 offices and 590 employees of the unit, Ameritrust Texas Corp.
Texas Commerce officials said they expect Ameritrust's emphasis on personal trust services to mesh well with their own trust efforts. "We believe in the future of the trust business as an important portion of fee revenue," said Marc J. Shapiro. Texas Commerce's chief executive. Ameritrust Texas "is a very significant institution in this business with a long history."
Was Owned by MCorp
Ameritrust Texas was formerly owned by MCorp, a Dallas-based bank company that sold its trust assets to Cleveland's Ameritrust Corp. in 1990 as it was struggling to avoid takeover. When Society, also based in Cleveland, bought Ameritrust in March 1992, the Texas trust unit joined its fold.
Society became a major trust bank through the purchase, with about $67 billion of trust assets and $27 billion under active management. But the company said Tuesday that it had no other major units in the Lone Star State to justify keeping the Ameritrust operation.
"We tried to find a local commercial banking franchise to complement the trust business in Texas but failed to do so," a Society spokesman said.
Society will retain 40 of the Texas unit's 630 employees on its payroll to oversee a few business lines, including shareholder services.
Gain for Society Corp.
The Cleveland-based company, which has $26 billion in assets, said it expects to record a $10.1 million after-tax gain on the sale, which is expected to close before yearend. The transaction will also remove $100 million of intangible assets from Society's balance sheet.
The purchase price will be supplemented by the net equity value of Ameritrust Texas when the deal closes, an amount analysts
said would be small. In total, Texas Commerce said it will pay about 3.25 times the $40 million of revenue recorded by the trust unit last year.
That would represent a slight premium over the market valuation of some trust companies, according to an official at Texas Commerce. For example, she said. Northern Trust Co., a major provider of trust services, trades at about 2.76 times last year s revenues.
Early Tuesday afternoon Society's stock was down 37.5 cents , trading at $34.50 a share. Chemical's shares were changing hands at $40.125, up 25 cents.
Texas Commerce's $8.5 billion of trust assets under management includes $2.5 billion from its acquisition in February of several bank subsidiaries of First City Bancorporation of Texas.
The First City deals transformed the Chemical unit into a major personal trust banker in Texas. Texas Commerce, which has $21 billion of assets, was recently forced to divest some small First City banks to satisfy antitrust objections, but the trust business will not be a problem, a Texas Commerce spokeswoman said.
Mr. Shapiro said he expects the trust area to generate $100 million of revenue for Texas Commerce this year -- producing 25% of his company's fee income.
He added that the new unit complements Texas Commerce's trust strategy by strongly emphasizing personal trust products and services. Ameritrust derives about 60% of its revenues from personal trust, he said, with the remainder split between corporate trust and employee-benefit accounts.
Texas Commerce gets about 50% of its trust revenues from personal accounts, 30% from corporate, and 20% from employee-benefit services.
Susan L. Roth, an analyst at Kidder Peabody & Co., said personal trust is a major focus o most market participants today.
"Right now, the institutional business is so competitive as to be less attractive," Ms. Roth said. "There is less price-sensitivity in the personal business, which is becoming more and more relationship-oriented and generally more lucrative."