A merger agreement that would create a $3.1 billion-asset thrift company with the ninth-largest market share in the Chicago area is getting mixed reviews.
MAF Bancorp, Clarendon Hills, Ill., last week said it agreed to pay $277 million to acquire $1.2 billion-asset N.S. Bancorp, Chicago, a franchise with a low-cost deposit base near MAF's existing market.
"The two companies do not significantly overlap markets," said Allen H. Koranda, MAF's chairman and chief executive.
The combined entity would have $275 million in market capital and 20 branches. The deal is expected to close in the first half of 1996.
After a conference call about the merger with management last week, some analysts still questioned the transaction.
"I guess I'm a little skeptical," said Christine Pavel, an analyst with the Chicago Corp. N.S. Bancorp buys many loans from outside the Chicago area and has a heavy CD deposit base, she said.
"The bottom line is you don't come in with a lot of good relationships you can cross-sell," Ms. Pavel said. "I think the revenue enhancement part of it will be very slow."
However, the deal would push MAF from 16th in market share to ninth, with 1.82% of Chicago's fragmented market, she said.
"If, over time, they can even maintain that and shift their deposit composition toward the core transaction relationship-type deposits, that will enhance their franchise value," she said.
Joseph Duwan, an analyst with Keefe, Bruyette & Woods, New York, said the strategy makes a lot of sense for MAF, but he still expressed reservations. "What I'm wrestling with now are the financial implications," he said.
The full benefit of the deal will not be seen until mid-1997, after MAF works through the transition, he said.
After the purchase, MAF will combine the institutions into one thrift charter, but continue to use the names of the subsidiaries, Mid America Federal Savings Bank and Northwestern Savings Bank.
N.S. Bancorp chairman and chief executive Henry Smogolski will retire, but will be a member of the combined entity's new board, along with another N.S. executive.
MAF is financing the deal through $134 million in MAF common stock, $105 million in cash from N.S. Bancorp, and $38 million in debt financing.
The transaction will be payable in 51% stock and 49% cash, based on MAF's stock price at the closing. The participants can terminate the agreement if MAF's average stock price goes above or below certain limits.
