In an acquisition that could move it into the ranks of the top 25 banking companies, First Bank System Inc. said Friday it plans to acquire Metropolitan Financial Corp. for more than $800 million in stock.
The companies, both based in Minneapolis and with a multistate network of banking offices, signed a letter of intent and are working out the exact transaction cost. The price is expected to be between $811 million and $877 million, or between 1.59 and 1.71 times Metropolitan's book value of $15.75 per share.
Norwest Would Be Larger
Metropolitan's $8 billion of assets - principally in Metropolitan Federal Bank of Fargo, N.D. - would boost First Bank to $34.5 billion in assets. That would be about $650 million more than the assets of the 25thlargest bank holding company, First Fidelity Bancorp., on March 31, but First Bank would still be in the shadow of its Minneapolis-based rival Norwest Corp., which had $55.3 billion.
First Bank said it anticipates dramatic postmerger cost reductions of.about $75 million, or 35%, annually.
"It provides an in-market consolidation opportunity," Brent Erensel, an analyst at UBS Securities, said of the deal.
More than half of Metropolitan's $5.7 billion of deposits are on the books of branches in locations where First Bank also has own offices, primarily in the Upper Midwest. First Bank would be tripling its deposits in North Dakota, to $2.5 billion, and entering Nebraska, Iowa, Kansas, and Wyoming.
Analysts said First Bank's cost-cutting estimate is probably modest. "First Bank always is conservative in those projections," said Ben Crabtree, managing director at Dain Bosworth Inc., Minneapolis.
Mr. Crabtree said the bank will pick up about $1 billion of deposits in Iowa, $800 million in Nebraska, $500 million in Kansas, and $400 million in Wyoming.
Adding 300,000 Households
First Bank would increase its total customer base by more than 300,000 households.
The acquisition is expected to close in the first quarter of 1995, pending a definitive agreement and required approvals, and to be accretive to earnings at about the same time.
Even though Metropolitan is technically a thrift, First Bank's vice chairman and chief financial officer, Richard Zona, said it makes a good match with his superregional commercial bank.
"They had put in much more of a sales culture in their branch system, which is something that we've done. And they introduced a broader product line than a typical thrift," Mr. Zona said.
Metropolitan spokeswoman Patricia Henning said the two banks, with headquarters about two blocks apart, had not worked out what role, if any, Metropolitan's chairman Norman Jones would play after the merger.
Metropolitan's stock price rose $6.50 on Friday, to $22.75. First Bank was down 25 cents, to $36.25.