Mercantile Bancorp. of St. Louis has scheduled a special board meeting for today amid signs that the company is in merger talks.

Firstar Corp. of Milwaukee is being mentioned as the likeliest buyer, though an auction is possible, sources close to Mercantile said. Mercantile and Firstar declined repeated requests for comments.

Mercantile would not disclose the agenda for the board meeting, which comes nine days after its annual meeting. That gathering, held in Des Moines, was dominated by shareholders pressing the company to consider a sale.

The market has been buzzing for months about a possible sale by Mercantile. The company's share price spiked in early March on rumors that Firstar, National City Corp., or U.S. Bancorp was in pursuit. Bank One Corp. and Wells Fargo & Co. have also been mentioned as possible buyers.

Mercantile, itself an active acquirer over the past decade, has a number of investors who are upset with the company's earnings performance and say a sale is in their best interest.

It is by no means certain that a deal will materialize. However, there are signs to suggest that discussions are afoot.

Firstar chief executive officer Jerry A. Grundhofer has spoken with Mercantile investors to tell them about the benefits of owning Firstar stock, according to two sources, who requested anonymity.

They said that when Mr. Grundhofer was asked specifically about Mercantile, he told investors that any acquisition would have to be friendly to assure that it would get done. Meanwhile, they said, Mercantile chairman and chief executive officer Thomas H. Jacobsen has told people he has had discussions with Mr. Grundhofer.

According to hotel telephone records reviewed by American Banker, W. Randolph Adams, Mercantile's chief administrative officer, placed a three- minute phone call to David M. Moffett, Firstar's chief financial officer, on the morning of Mercantile's annual meeting last week. Each man is his company's point person for mergers. The charge for the call was inadvertently listed on an American Banker reporter's hotel bill.

Mr. Adams declined to discuss the call, and Mr. Moffett did not return requests for comment.

One insider discounted talk of a sale. While the Mercantile board has discussed possible mergers in the past, neither a Firstar merger nor any other company combination was presented to the board during the meeting last week, said Craig D. Schnuck, a St. Louis-based director of Mercantile.

Mr. Schnuck said he empathized with unhappy investors. However, "the worst thing to do is a fire sale," he said.

Meanwhile, some analysts have been touting the advantages of a sale. Thomas Hanley of SBC Warburg Dillon Read & Co. has named Mercantile his top takeover pick.

At Mercantile's annual meeting last week, Mr. Jacobsen told shareholders he wouldn't rule out selling, but "we always want to deal from a position of strength." In response to investor demands over the past year for improved performance, Mr. Jacobsen has put in place a restructuring program that includes 1,300 job reductions, or 11% of the work force.

If a deal between Firstar and Mercantile materializes, the combined company would have $73.5 billion of assets, and would become the 15th- largest U.S. banking company. It would span 11 states in the Midwest and the south-central United States.

Analysts say Firstar could afford to pay handsomely for Mercantile due to its highly valued stock. Most analysts say the company could pay $65 to $70 per share, although some have put that figure higher. Using that range, the deal could be worth up to $11 billion.

However, Firstar would "have to do a good job selling it today," said Michael Plodwick, an analyst with Lehman Brothers. The company combined with Star Banc Corp. just five months ago, and "the market wants to see a little more evidence the merger is working."

Mercantile shares closed Thursday at $51.25, up 12.5 cents. Volume was slightly above average, with 424,900 shares changing hands-the highest level since April 20, the eve of the annual meeting.

Firstar shares closed at $31.5625, down 37.5 cents.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.