The most persistent of the current merger rumors points to what some market observers see as one of the most logical of all combinations.

The principals in this so-far imagined pairing-First Union Corp. and Fleet Financial Group-"would be literally crazy" not to conclude a deal, said Advest Inc. analyst Anthony J. Polini. "It is a tremendous opportunity for both companies."

Fresh from its $19.8 billion acquisition of CoreStates Financial Corp. in Philadelphia, First Union could establish a truly commanding position along the East Coast. The company now has $220 billion of assets, 2,550 branches, and 16 million customers in 12 states.

Fleet, with $97.7 billion of assets, would bring Charlotte, N.C.-based First Union one of the top four market positions in four states where it has no current presence: Massachusetts, Maine, New Hampshire, and Rhode Island.

The deal would also create a big Connecticut operation. Fleet has 19.91% of the state's deposits, the No. 1 share, and third-place First Union could add another 7.05%, according to Sheshunoff Information Services.

"If you put the two companies on a map, it looks pretty good," said Thomas F. Theurkauf Jr., an analyst at Keefe, Bruyette & Woods Inc. "You get a hammerlock on the Eastern Seaboard. You get a substantial presence from Florida to Maine."

To be sure, despite a lot of talk about actual or potential negotiations, this is still just speculation. Some analysts are skeptical that Fleet and First Union will come together.

At a UBS Securities conference Thursday, Fleet Financial Group chairman Terrence Murray responded "yes" when asked if he intended that Fleet be independent 18 months from now.

But that does not prevent people in Wall Street from mulling over the possibilities and the price First Union might have to pay.

Analysts generally put the price tag near $30 billion. Per-share estimates vary from $105 to $115-or 3.75 to 4.1 times book value-and assume cost savings of between 20% and 35% from the elimination of overlaps in the New York and New Jersey branch networks.

First-year dilution would amount to between 3% and 5%, analysts said.

"It has all the elements of a good deal, a do-able deal," said David C. Stumpf at A.G. Edwards.

Fleet, which has $68 billion of deposits in seven northeastern states and relationships with 13.2 million customers, would fit almost seamlessly with First Union from both a geographic and a business line perspective, analysts said.

Fleet's recent emphasis on fee businesses, particularly investment management, complements First Union's carefully engineered growth in capital management. Fleet would also give First Union an enviable retail distribution network for pushing its fee-based products.

Last year Fleet sold a variety of businesses, including a mortgage banking subsidiary, indirect auto loan portfolio, and corporate trust unit. The proceeds went toward buying the asset management firm Columbia Management Co., the Quick & Reilly Group discount brokerage, and Advanta Corp.'s credit card business.

Fleet's fee income amounted to 42.5% of total revenue in the first quarter, and many analysts see that rising to 46% by the end of this year. First Union hit 46% in the first quarter.

"I think they see the world similarly," said Anthony R. Davis, an analyst with SBC Warburg Dillon Read. "Both of them have done a very good job in terms of integrating acquisitions and allocating capital effectively, putting money into businesses they can grow."

Fleet's position in New England as the No. 1 lender and cash management provider to middle-market companies is said to dovetail with First Union's strategy. While Fleet caters to the insurance, communications, and commercial real estate industries, First Union specializes in oil and gas, communications and technology, health care, and real estate, Mr. Davis said.

One question mark is in in credit cards. Fleet is building a national presence, but First Union has been pulling back, selling off two "noncore" chunks of its loans to Providian Financial Corp. of San Francisco.

First Union's stock price could be a hindrance to a Fleet-size acquisition. The shares are trading at about 13.5 times 1999 earnings, and closed Thursday at TK, up/down TK. Fleet, at 15.2 times 1999 earnings, closed at TK, up/down TK.

First Union completed its CoreStates acquisition only this week.

In cutting that deal, First Union committed to locating its regional headquarters for Connecticut, New York, New Jersey, Delaware, and Pennsylvania in Philadelphia. First Union placed several CoreStates executives in key positions and agreed that the corporate banking base would also be in Philadelphia and overseen by CoreStates chairman Terrence A. Larsen.

Any deal with Fleet might require those arrangements to be revisited.

Nonetheless, "I have never seen a plum more ripe for the picking," Mr. Polini said. "Farmer Crutchfield (Edward Crutchfield, chairman of First Union) should get out of the barn and do some shopping."

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