Hibernia Corp. of New Orleans and First Guaranty Bank of Hammond, La., said Tuesday that they have terminated their merger agreement from last July.
The scuttled $78 million deal is the latest setback for Hibernia, whose stock valuation has fallen sharply in the wake of loan problems that hurt first-quarter results.
The bank said three investment advisers declined to issue opinions that the deal was fair to First Guaranty stockholders. Keefe, Bruyette & Woods Inc. of New York, Chaffe & Associates Inc. of New Orleans, and National Capital Cos. of Washington worked on the proposed acquisition.
Hibernia said that without a fairness opinion, obtaining a required two- thirds vote of First Guaranty's shares "would be impossible."
In a prepared statement, Hibernia chief executive Stephen A. Hansel said, "We're disappointed we could not complete this transaction, but we believe this is the sensible thing to do."
First Guaranty's chairman, Marshall T. Reynolds, said in a statement that his board of directors had determined that his bank's continued independence was now best for stockholders and customers.
Hibernia was to offer 1.33 shares of its common stock for each share of First Guaranty common stock, and $2 million in cash for preferred stock.
In the intervening period, however, Hibernia's stock has fallen about 35% in value.
The related plummeting worth of the deal became unpalatable for First Guaranty. Last September, Hibernia sued First Guaranty, saying the smaller bank was attempting to walk away from the deal.
In a December settlement, Mr. Reynolds, who owns about 32% of First Guaranty shares, agreed to vote his shares in favor of an acquisition if one of the investment banking firms issued a fairness opinion. Mr. Reynolds also agreed to recommend that other shareholders vote for the agreement if that occurred.
When the opinions were not forthcoming, the deal collapsed.
But the torpedoed transaction-and lower stock prices for banks in general-are unlikely to stem the trend to more mergers and acquisitions, according to J. Reid Moore, a mergers and acquisitions consultant at Speer & Associates Inc. of Atlanta.
"You still will see continued consolidation pressure despite lower stocks," Mr. Moore said. "There is pressure for those who want to do a deal to get things done before (the Financial Accounting Standards Board) does away with pooling-of-interest accounting."