Compass Bancshares in Alabama said Friday that it plans to enter Colorado with an agreement to buy Denver-based Megabank Financial Corp. for $94 million in stock.
Buying $298 million-asset Megabank, which has nine branches in metropolitan Denver, would continue an expansion in the West by Birmingham-based Compass. It entered Arizona last December when it bought $285 million-asset Arizona Bank in Tucson; in July it announced its intention to cross into New Mexico by purchasing $758 million-asset Western Bancshares in Albuquerque.
"This is quite typical of the type of acquisition Compass has been doing," said Christopher T. Kelley, an analyst with Morgan Keegan & Co. in Memphis. "They like these western states with good economic trends and where bigger, out-of-state banks dominate the landscape."
Compass, which has $17.7 billion of assets, also has branches in Alabama, Texas, and Florida.
D. Paul Jones Jr., Compass' chairman and chief executive officer, said Megabank is "a strong, profitable bank operating from prime locations in a prospering market that has continuing prospects for a bright future." Denver's economy, he said, is growing at a rate twice the national average.
Thomas R. Kowalski, chairman of Megabank, and Larry Olsen, its president, are expected to remain with Compass to manage its Denver operations. Compass said it does not expect to lay off any of Megabank's 100 employees.
As in the past, Compass is entering a territory by buying a community-bank instead of a regional holding company.
"Their strategy is to come into a market through a small institution and offer new products to make the institution more competitive," Mr. Kelley said. "Compass has executed these sorts of transactions well."
The deal, which calls for Compass to exchange 3.45 million of its shares for Megabank in a tax-free pooling of interests, is to be completed in the second quarter.
This is the second bank deal Compass has announced in the span of two weeks. On Oct. 21, it said it would buy $300 million-asset Hartland Bank in Austin, Tex., for $86 million in cash.
