Indiana-based CNB Bancshares, eager for the visibility that comes with size, is planning to boost its assets 50% by buying Michigan's Pinnacle Financial Services for $583 million.
The deal, announced Wednesday, would balloon CNB's assets to $6.6 billion, from $4.4 billion, and make it the largest banking company based in Indiana.
"We'll now show up on more radar screens," said CNB chief executive officer James J. Giancola. Recognition by institutional investors "will give us more depth and more liquidity."
In New York Stock Exchange trading, shares of CNB fell $2.56, to $42.19. Shares of Pinnacle rose $2.13, to $42.25.
The merger would bring together two of community banking's hungriest acquirers.
Since 1986, CNB has bought 31 small banks and insurance agencies, and seven deals boosted Pinnacle's assets from $150 million to $2.2 billion.
The deal, subject to shareholder and regulatory approval, is expected to close in the second quarter of 1998. At that time, CNB would have 142 branches in four states, expanding beyond its base in central and eastern Indiana to northwest Indiana and southwest Michigan. CNB also operates in southern Illinois and Kentucky. Pinnacle's 28 branches, 14 each in Michigan and Indiana, are to take the Citizens Bank name.
Even at 3.5 times book value, CNB got a good deal, said Daniel Cardenas, an analyst at Chicago-based Howe Barnes Investments Inc.
"It's entering a market that's growing like a weed," Mr. Cardenas said of northwest Indiana.
Michael M. Moran, an analyst at Roney & Co. in Detroit, said the merger fits into the long-term strategies of both banking companies.
Buying Pinnacle, he said, will give CNB a strong presence in Michigan and a foothold in northern Indiana. "This is a way for CNB to round out its presence in the state," Mr. Moran said.
Pinnacle has been beefing up to make itself more attractive to potential suitors, Mr. Cardenas said.
Though he said he had expected Pinnacle to wait another year before selling, Mr. Cardenas added that the company hasn't been shy about growing "with an eye toward being acquired down the road."
"This merger with CNB successfully completes our plan," said Richard L. Schanze, Pinnacle chairman and chief executive officer. "Our shareholders have been richly rewarded."
Mr. Schanze will step down once the merger is completed. Andrew Weaver, Pinnacle's president and chief operating officer, will be president of CNB's new Michigan subsidiary.
"CNB's more extensive product line will add tangible benefits to our small- to middle-market business customers-especially in the cash management, trust, and employee benefit plan areas," Mr. Weaver said. "Our retail customers will benefit from CNB's Internet banking, expanded mortgage loan products, and trust services."
In an interview Wednesday, chief financial officer David W. Kolhagen said Pinnacle is not abandoning its community bank roots by merging with CNB. No exodus of customers is expected because the former Pinnacle branches would still be run by the same management teams.
"We know our markets better than anyone else, and CNB knows that," said Mr. Kolhagen.