Continuing its acquisition drive, Ohio's Huntington Bancshares on Tuesday agreed to acquire Indiana-based Railroadmen's Federal Savings and Loan Association for about $88.6 million in stock, or about twice book value.
The deal will nearly double Huntington's small presence in the prized Indianapolis area and give it a toehold in the Chicago market.
Huntington, which has $14.4 billion in assets and 287 branches in seven midwestern states, has long sought to enlarge its presence in Indiana.
Railroadmen's shares soared on the news to $38, up $9.25 from Friday's close. Huntington's shares lost 37.5 cents, falling to $25.75 a share in late trading.
Railroadmen's, which has $660 million in assets, will merge its 13 Indiana branches and two Illinois outposts into the Huntington National Bank of Indiana, which now has 10 branches.
"Huntington has operated in Indianapolis for seven years, building a strong presence in niche busenesses such as indirect automobile and small business lending," said Frank Wobst, the company's chairman and chief executive officer, in a prepared statement. "The acquisition of Railroadmen's will enhance our presence significantly."
Called Worth the High Price
Analysts said that Railroadmen's is worth the relatively high price tag.
"Railroadmen's isn't your typical thrift," said Kenneth Puglisi, an analyst at Chicago Corp.
The company earned $6.6 million in 1992, translating into returns of 1.04% on average assets and 18.8% on equity. The numbers complement Huntington's own strong performance. It returned 1.08% on assets and 15.46% on equity in 1992.
The deal, expected to close in the fourth quarter, will cause less than 1% earnings-per-share dilution this year and add about 1% to shareholder earnings by the end of 1994, Huntington officials said.
No Branch Closings
Huntington, which will still have a relatively small market share in Indiana, does not plan to close any branches and will retain most of Railroadmen's senior management, said Debra Dendahl Hadley, a bank spokeswoman.
Since entering Indianapolis in 1986, deposit gathering and lending has been lackluster because the bank lacked a sizable branch system, Ms. Hadley said.
For its part, Railroadmen's was inspired to sell by the persistent low interest rate environment, said John Dee, the thrift's president and chief operating officer.
J.R. Kocher, chairman and chief executive officer of Railroadmen's, is expected to serve as chairman of Huntington Bancshares Indiana Inc. and its Huntington National Bank of Indiana unit.
Mr. Dee and the thrift's other senior officers also will join its "senior management team," the bank said.
Huntington recently completed the acquisition of Charter Oak Financial Corp., a Cincinnati-based thrift with $480 million in assets.
And in addition to Railroadmen's, it has two other purchases pending in West Virginia: CB&T Financial Corp., which has $800 million of assets, and Commerce Banc Corp., with $900 million of assets.