First Bank System Inc. announced Mondy that it has agreed to acquire the last major independent banking company in Colorado for about $525 million in stock.

By acquiring Colorado National Bankshares Inc., First Bank will overtake Minneapolis rival Norwest Corp. as the biggest player in the Rocky Mountain Mountain State.

The state's other major banking companies are owned by Columbus, Ohio-based Banc One Corp. and Los Angeles-based First Interstate Bancorp.

Sign of Recovery

The deal was viewed as further proof that Colorado's financial institutions have recovered sharply from the energy and realty crises of the 1980s.

Indeed, First Bank agreed to pay a hefty 2.14 times Colorado. National's book value, one of the steepest premiums offered for a Colorado institution in recent memory.

"It's a very high price," said Ben Crabtree, an analyst at Dain Bosworth Inc., Minneapolis.

Shares of Colorado National soared $6.125, to $38.875, on the news while shares of First Bank System fell 62.5 cents, to $25.125, in late trading. Volume for both stocks was heavy, at more than one million shares.

Analysts said the deal was widely expected because First Bank already owns 4.9% of Colorado National's stock, and the two companies have a joint credit card venture.

Object of Speculation

Colorado National, which has $3.2 billion in assets, also was cited in an American Banker article last week as one of five large independent banking companies likely to be targeted by suitors within a year.

"This may have been the most oft-rumored takeover play in recent banking history," said Steven Schroll, a banking analyst at Piper Jaffray, Minneapolis.

Colorado National is a profitable company, with 24 branches holding $2.7 billion in deposits. The bank earned $22 million in the first nine months of this year, representing a hefty 1.21% return on assets, excluding extraordinary gains.

First Bank, which will have about $25 billin in assets when all its pending acquisitions are completed, has actively sought deals in Colorado since it entered the state four years ago.

In April, First Bank announced it had agreed to acquire Centennial Savings Bank, a Durango-based thrift with $152.4 million in deposits.

The following month, the company announced it would acquire Western Capital Investment Corp., parent of Denver-based Bank Western, with 2.4 billion in deposits.

First Bank's acquisition of Centennial fell through after the two companies failed to reach an agreement on a purchase price. First Bank expects to complete its acquisition of Bank Western by the end of the year.

"We are not going to be making additional acquisitions," said John F. Grundhofer, First Bank's chairman and chief executive. "Our Colorado strategy is pretty well complete outside of a few possible fill-ins."

Avid Cost Cutter

Mr. Grundhofer, an aggressive cost cutter who was dubbed a "chain saw banker," by a local Minneapolis magazine, said he planned to slash Colorado National's annual operating expenses by 35%, or $70 million.

Under the terms of the transaction, Colorado National shareholders can exchange their shares for 1.71 shares of First Bank. The acquisition will dilute First Bank's per-share earnings 3% next year, but will result in a 5% gain in 1994.

First Bank said it would merge all its Colorado operations into Colorado National. The consolidation will lead to the closing of 20 to 30 branches, Mr. Grundhofer said.

Will F. Nicholson Jr., Colorado National's chairman and chief executive, will be president and chief executive of First Bank's Colorado subsidiary. He will also become a director on First Bank's board.

Norwest Corp. gaind the biggest franchise in Colorado more than a year ago when it bought United Banks of Colorado, which had $4.7 billion in deposits.

And Banc One recently completed its acquisition of Affiliated Bankshares of Colorado, which controls some $2.4 billion in deposits.The PartnersAt a Glance First Bank Colorado System NationalHeadquarters Minneapolis DenverCEO John F. Will F. Grundhofer Nicholson Jr.Assets $21.8 $3.2 billion billionDeposits $18.3 $2.7 billion billionBranches 213 24Number of 10,900 2,700employeesROA* 1.34% 1.21%ROE* 17.00* 16.30%* Nine months ended Sept. 30First Bank figures include pendingmergers, except Colorado National Sources: Company reports

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