Continuing a Nebraska shopping spree, First Bank System Inc. said Monday that it had agreed to acquire Firstier Financial Inc. for about $700 million in stock, or 1.9 times book value.
The acquisition, combined with another Nebraska deal completed in January and two announced in June, would make Minneapolis-based First Bank the largest in that state, with the No. 1 market share in the capital city of Lincoln, and No. 2 in Omaha.
The deal highlights a belief among analysts that the Midwest is becoming the next hot spot for bank mergers. Until now, consolidation has been much less common there than in other parts of the country.
According to Ben B. Crabtree, of Dain Bosworth, "the virtual inevitability of the smaller banks' being acquired is accepted now. This is the kind of deal that is going to happen a lot more. There'll be a lot of activity."
Investors had apparently been betting that Firstier would be acquired, bidding up its share price to $39 on Friday - $1 higher than the purchase price disclosed Monday. The stock closed Monday at $37.
Omaha-based Firstier has 52 offices in Nebraska and 11 offices in neighboring Iowa, $2.8 billion of deposits and $3.6 billion of total assets.
John F. Grundhofer, First Bank's chairman, president, and chief executive, called Firstier "the premier banking organization in Nebraska" and an "excellent fit with our strategic priorities."
Analysts said First Bank is paying a fair price for one of the better- run banks in an attractive midwestern market. Nebraska is experiencing moderate growth, and unemployment in Lincoln and Omaha is 2.5% or less.
"This is a terrific market for them. The demographics are outstanding," said James M. Schutz, a vice president at Chicago Corp. "Firstier is a good bank, with a whole lot of good people. There's no question about that."
Some analysts questioned the price of the transaction, but most agreed it was in line with recent bank deals.
First Bank is to exchange 0.8829 share of its common stock for each one of Firstier.
"It is about what I figured (Firstier) was worth," said Mr. Crabtree. "The only problem with Firstier is that it is so well run and so efficient that (First Bank) is not going to be able to take huge costs out."
But Rick Zona, First Bank's chief financial officer, said there would be substantial savings in the consolidation of back-office work, in addition to the closing of approximately two dozen branches.
Officials said there would be job losses, but they were not sure how many. Firstier said the acquisition will require a one-time, after-tax restructuring charge of $35 million.
David A. Rismiller, chairman and chief executive of Firstier, is to be CEO and general manager of First Bank's combined Nebraska group.
The negotiations were a second go-around for Firstier. Columbus, Ohio- based Banc One Corp. agreed to buy the company in April 1993, but the deal fell apart early last year when a falloff in Banc One's stock price lowered the purchase value from $712 million to $535 million.
First Bank's agreement came on the heels of Mercantile Bancorp.'s announcement late Friday that it had agreed to buy Des Moines-based Hawkeye Bancorp. for $340 million.