Milwaukee-based Firstar Corp. on Monday agreed to buy Investors Bank Corp., a $1 billion-asset Minnesota thrift, in a stock-swap deal valued at $106 million.

The deal, expected to close in the first quarter of 1995, will double Firstar's presence in the Minneapolis-St. Paul market and expand its mortgage banking business. Firstar will exchange 0.8676 a share for each Investors share. Based on current trading values, the purchase price equals 2.16 times Investors' book value, or 10.6 times analysts' consensus 1994 earnings forecast, as published by First Call Corp.

Roger L. Fitzsimonds, Firstar's chairman and chief executive, said the deal "will give Firstar access to very attractive new markets in the Twin Cities." The area is now dominated by First Bank System and Norwest Corp.

Firstar apparently will either minimize or avoid near-term earnings dilution in the deal, but the banking company will have to boost Investors' revenues if shareholders are to profit from the acquisition, said Smith Barney analyst Henry C. Dickson.

As part of the deal, Firstar will repurchase up to 320,000 of its own shares, which will be exchanged along with roughly 2.9 million newly-issued shares. In addition, Firstar will retire Investors' preferred stock for $8.4 million in cash.

Investors earned $5.1 million in the first half, for annualized returns of 1.06% on average assets and 22.4% on average equity. Problem assets comprised a slender 0.46% of total assets at midyear.

Firstar's stock was down 25 cents in Monday trading and closed at $31.875. investors' shares closed at $24.633, up 12.5 cents.

Investors' 12 branches will be merged into Firstar Bank of Minnesota, which is headed by Richard W. Schoenke. The thrift's 12 mortgage production offices will be folded into Firstar Home Mortgage Corp., Milwaukee.

James M. Burkholder, president and chief executive of Investors, will become president and chief executive of Firstar Home Mortgage.

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