LOS ANGELES -- First Interstate Bancorp said Tuesday it agreed to acquire Levy Bancorp and its principal subsidiary, Bank of A Levy, in a stock transaction valued at $86.5 million, or 1.84 times book value.
The acquisition will boost First Interstate's standing in wealthy Ventura County, Calif., from sixth place to second, giving it 16% in total-deposit market share.
The deal, which marks First Interstate's second acquisition in Ventura County, is expected to close in the first quarter of 1995, subject to regulatory approval. It is slated to be accretive to earnings some time in 1995.
1.2M Share Repurchase Set
First Interstate said it would repurchase approximately 1.2 million common shares to finance the transaction, which will be accounted for as a purchase.
"Bank of A Levy is a recovering institution that experienced many of the typical problems facing commercial banks in the recession, particularly real estate. But it's got sizable market share and for the price First Interstate paid, I can't argue with it," said Dakin Securities' Campbell Chaney.
But Donaldson Lufkin & Jenrette's Tom Brown said he thought the price was "on the high end of the range." First Interstate's stock closed Tuesday trading at $74.625, down $1.25
Bank of A Levy holds $625 million of assets and 17 locations in Ventura County. First Interstate has eight offices in the county. It is unclear whether there will be any branch closings or layoffs as a result of the deal.
"With average household income and population growth well above state and national averages, Ventura County is strategically important to First Interstate," said Bruce G. Willison, chairman and chief executive of First Interstate Bank of California. "We believe a top-three ranking in key markets is a financial advantage."
According to First Interstate spokesman David Garcia, there isn't much overlap between the two banks' Ventura operations. However he noted that "consolidation is always possible."
January Acquisition a First
First Interstate made its first venture into Ventura County earlier this year, completing the acquisition of First State Bank of the Oaks in January. Four of First State's five branches were closed in the wake of that transaction, and the majority of First State's employees were laid off, said First Interstate spokesman Ken Preston.
With Pasadena, Calif.-based C.E. Peterson & Co. as its advisor, Levy Bancorp approached First Interstate about doing the deal. First Interstate used an internal acquisitions team to handle its end of the negotiations.
First Interstate Bancorp will exchange its common shares for all of the outstanding shares of Levy Bancorp's common insuring a tax-free transaction for Levy shareholders.
Bank era Levy has $575 million in deposits and $297 million in loans.
Since January 1993, First Interstate Bancorp has agreed to 16 acquisitions, 12 of which have already closed.
Once all 16 deals are complete, the superregional will have added some $9.8 billion in new assets to its current total asset size of $53.3 billion.
