In the latest bizarre twist of the Compass Bancshares proxy fight, chairman and chief executive D. Paul Jones Jr. is said to have discussed an in-market merger with one or more of the other four large Alabama banks.
The fact that Mr. Jones would even consider such a deal suggests Alabama's fourth-largest bank is now in play - however the challenge from director and founder Harry B. Brock Jr. turns out.
Mr. Jones declined to comment on the rumors. But sources close to the situation said that Mr. Jones had held an exploratory discussion in recent weeks with one of the major Alabama banks. Besides $9.1 billion-asset Compass, they are: Regions Financial Corp., SouthTrust Corp., and Amsouth Bancorp. - all based in Birmingham - and Colonial BancGroup, Montgomery.
SouthTrust said it wasn't the bank in question. "Absolutely not," SouthTrust chairman and CEO Wallace Malone said through a spokesman. Regions, Amsouth, and Colonial all declined to comment.
Mr. Brock, who founded Compass in 1963, announced Jan. 27 that he would mount a proxy fight to replace three of the bank's 12 directors with his own nominees in order to win voting control of the board. He has said he would then solicit takeover bids.
Mr. Jones, on the other hand, has been publicly adamant that Birmingham- based Compass would remain independent.
An in-market combination of Compass with SouthTrust, Amsouth, or Regions would produce enormous cost savings for the acquirer, as overlapping branch networks and back-office functions were eliminated. But it also means many Compass employees would lose their jobs.
Mr. Brock has maintained that Compass is better off seeking an out-of- state acquirer that does not have a presence in Alabama. He recently made public a buyout offer he solicited last year from Charlotte, N.C.-based First Union Corp.
First Union offered $30.71 a share for Compass, a 35% premium on Compass' stock price at the time. Mr. Brock launched his proxy challenge after the Compass board rejected the proposal.
Mr. Brock took pains to point out that First Union overlapped with Compass in only one state, Florida, and then only slightly, so that layoffs would have been minimal. He said last week that he remains opposed to an in-market deal.
"You could make a case that the cost savings would make up for the 35% premium we will get from an out-of-state acquisition," he said. "But it would devastate the Alabama operation."
A banking attorney familiar with the Compass situation, who did not wish to be named, raised another objection: An in-market deal in Alabama would probably create major antitrust problems. The four largest banks already control three-fourths of the state's deposits.