Mercantile of St. Louis buying Kansas City's Central Mortgage.

St. Louis-based Mercantile Bancorp. has agreed to buy Central Mortgage Bancshares, snapping up the largest healthy independent in the coveted Kansas City, Mo., market.

In a deal announced Wednesday night, Mercantile said Central Mortgage shareholders would be paid about $22.50 a share, or about 2.14 times tangible book value, for the $629 million-asset franchise.

The deal has a value of $99.1 million, based on Mercantile's closing stock price of $37.75 on Wednesday.

The agreement includes a provision that would give Mercantile an option to purchase up to a 19.9% stake in Central Mortgage if the deal breaks off.

Also, Mercantile said it may purchase up to 262,500 shares of its own common stock in open market transactions.

With the deal, Mercantile will acquire four banks with 17 offices in western Missouri and a Springfield, Mo.-based mortgage operation with nearly $500 million of servicing rights.

The deal is expected to solidify Mercantile's position as one of the top players in the heavily fragmented but consolidating Kansas City market.

"It easily enhances Mercantile's franchise," said Joseph Stieven, senior banking analyst at Stifel, Nicolaus & Co., which advised Central Mortgage on the safe.

"They are now in what are the fastest-growing suburbs in the eastern Jackson County area of Kansas City," he added.

In a statement,. Mercantile chairman and CEO Thomas Jacobsen agreed: "Central Mortgage's network provides a strategic expansion of Mercantile's Missouri franchise," he said.

It also brings Mercantile, which has a $12 billion-asset, four-state franchise, closer to Missouri's 13% deposit cap.

At midyear, the law restricted any institution from controlling more than $9.38 billion of deposits.

With the state's secondlargest franchise, Mercantile will be within $1.5 billion of the cap after the Central Mortgage deal is completed in early 1995.

Lynn Harmoon, chairman and CEO of Central Mortgage, said the bank pushed its four suitors for bids based on its standing as the largest community bank available on the Missouri side of the Kansas City market.

"That's the way we marketed ourselves," he said.

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