Cullen/Frost Bankers Inc. of San Antonio said Tuesday it had agreed to acquire Overton Bancshares of Fort Worth for $253.5 million in stock.

It is Cullen/Frost's biggest acquisition to date. The definitive agreement put the price at 4.65 times Overton's book value and 23.5 times estimated 1998 earnings.

Cullen/Frost, which has been intent on solidifying its position as the largest Texas-based independent bank, beat out seven other potential buyers. Buying Overton would put it back in the Dallas-Fort Worth area, which it exited in 1994.

"Yes, they're paying up for it, but you have to pay up" for footholds in major metropolitan markets, said analyst Eric Rothmann of Stephens Inc. in Little Rock, Ark.

The Fort Worth base of $863 million-asset, privately held Overton is one of the strongest growth markets in the country, he added.

The acquisition would bump Cullen/Frost up three spots to No. 7 in bank deposits in Texas. It would be No. 6 in the Fort Worth Metropolitan Statistical Area.

"You get what you pay for, and I think we're getting an excellent bank," said Richard W. Evans Jr., Cullen/Frost's chairman and chief executive officer. Mr. Evans said his company agreed to a "fair price compared with other transactions" around the country. "It's a logical extension of our Texas franchise."

Cullen/Frost had said it was too small to compete in Dallas four years ago when it swapped its $150 million-asset bank there with Chase Manhattan Corp.'s Texas unit for a similar-sized institution in Corpus Christi.

Mr. Evans said Overton brings Cullen/Frost the bulk to compete effectively and pursue other acquisitions in its part of the state.

"This gives us the ability to move into the last of the really high- growth areas of Texas," Mr. Evans said.

Although Cullen/Frost is paying a lofty price, it is getting one of the few banks left in Texas with nearly $1 billion of assets, said William Strunk, chairman of the consulting group Strunk & Associates of Houston. Mr. Strunk said Overton was also a good fit because of its reputation as a business bank and its relationships with high net worth individuals. Overton has $1.8 billion in trust assets.

Overton officials sounded surprised at the generosity of the bid. "It's an incredible price," said Overton president and chief executive officer David L. Tapp, who is slated to become president of Cullen/Frost's Forth Worth-Dallas division.

Founded 20 years ago by a group of Texas businessmen, Overton retained investment banker Keefe, Bruyette & Woods Inc. in October to solicit buyers. Eight banks expressed an interest, a group that Keefe said was unusually large.

Only Frost and one other company were allowed to review Overton's books. Mr. Tapp would not identify the other finalist, but sources said it was Compass Bancshares of Birmingham, Ala., which has been building its Texas presence.

Among the other banks interested in Overton were BOK Financial Corp. of Tulsa, Okla.; Colonial BancGroup of Montgomery, Ala.; Norwest Corp. of Minneapolis; and Zions Bancorp. of Salt Lake City.

Cullen/Frost was the high bidder, but it was also attractive to Overton because it had no overlapping operations, which meant less need for restructuring. Cullen/Frost said it would cut $5.8 million, or 15%, of Overton's operating costs over three years.

The merger would be 1% dilutive to earnings in 1998 but would add 2% to profits in 1999, the buyer said. Cullen/Frost plans to take a $7.7 million merger-related charge in the second quarter, when the acquisition is expected to close.

Credit Suisse First Boston acted as Cullen/Frost's adviser in the deal.

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