A former bank executive serving on Firstar Corp.'s board is seen as a driving force behind the Milwaukee banking company's move to be acquired by Star Banc Corp.
C. Paul Johnson, former chairman and chief executive officer of First Colonial Bankshares, Chicago, teamed up with another director, William W. Wirtz, to push Firstar management to sell, people close to the company said.
The company's top two individual shareholders, Mr. Wirtz and Mr. Johnson, both declined to comment. But a Firstar insider said he "would not refute" that Mr. Johnson had been pushing for a merger.
Its earnings momentum having faltered, Firstar is expected to announce today that it has agreed to a deal with Star Banc of Cincinnati worth about $7 billion.
Firstar's board was expected to meet Tuesday afternoon to approve the proposal, but bank officials declined to comment. Executives from the two banks were expected to present merger details to analysts in New York today, a person close to the bank said.
Firstar's apparent decision is the latest sign of how little margin for error banks have these days. A failure to meet earnings expectations can generate heavy pressure to sell from shareholders, analysts, and even among their own directors.
Mr. Wirtz, owner of the Chicago Blackhawks hockey team, has just under three million Firstar shares.
Mr. Johnson, whose bank was sold to Firstar in January 1995, owns about 1.6 million shares-twice as many as Firstar chairman and CEO Roger L. Fitzsimonds, according to company filings.
At current share prices, Mr. Wirtz's holdings are worth about $110 million, Mr. Johnson's $59 million.
Disclosures with the Securities and Exchange Commission suggest Mr. Johnson has been eyeing a Firstar transaction for some time.
In a December 1994 filing, shortly after Mr. Johnson agreed to sell First Colonial, the company said it had rejected a higher offer from another bank-believed to be U.S. Bancorp of Minneapolis-and accepted Firstar's bid because of "the perceived greater likelihood of a subsequent sale of Firstar."
Mr. Johnson's saber rattling in Milwaukee is reminiscent of what happened last fall at CoreStates Financial Corp. The Philadelphia banking company was acquired by First Union Corp. of Charlotte, N.C., only after George Strawbridge, a director who had come to the CoreStates board in its acquisition of Meridian Bancorp, had pushed the bank's reluctant management to sell. Mr. Strawbridge played a similar role at Reading, Pa.-based Meridian.
"Look out for board members from banks you bought," said Sullivan & Cromwell partner H. Rodgin Cohen at a recent conference on banking consolidation. "If he sold his company, you can be sure he'll be willing to sell yours."
Firstar has $20.4 billion of assets and ranks second in Wisconsin and Iowa deposits. It is fourth-largest in Minnesota and 15th-largest in Illinois, according to Sheshunoff Information Services.
Earnings growth slowed in 1997 to 5%, in large part because the company has not been able to cut expenses as quickly as its peers, UBS Securities banking analyst Thomas H. Hanley wrote in a recent report.
First-quarter earnings grew by 4%.
"They have had 10 quarters in a row in which earnings have been fairly flat," said Joseph Roberto, an analyst with Keefe, Bruyette & Woods. "My sense is it's not going to get any better."
Analysts said a disappointing second-quarter earnings report might have led Mr. Fitzsimonds, who up to now has insisted his company could go it alone, to change his mind.
Star Banc, meanwhile, increased earnings 31% in the first quarter and is generally viewed as one of the premier performers in banking.
Under CEO Jerry A. Grundhofer, the bank has won analyst acclaim for aggressively cutting Star Banc's costs and rewarded shareholders handsomely.
The Firstar acquisition would radically alter the size and geographical expanse of Star Banc. Concentrated in Ohio, Kentucky, and Indiana, Star has no presence in the big midwestern markets of Chicago, Milwaukee, and Minneapolis-St. Paul.
The acquisition would also put Mr. Grundhofer, the expected head of the combined company, in closer proximity to the company headed by his older brother, John F. Grundhofer of U.S. Bancorp.