Merrill Lynch & Co. solidified its claim as a top gun in the hot field of credit card consolidation, landing the advisory assignment in First USA's sale to Banc One Corp.

In the New York firm's biggest banking deal since it advised Bank of New York Co. in the sale of its AFL-CIO affinity card portfolio to Household International Inc. for $3.9 billion last summer, Merrill advised First USA Inc. in the $7 billion deal.

Banc One was advised in the deal by UBS Securities and Lazard Freres & Co., another firm involved in talks between major banks and credit card companies. Last December, Lazard was involved in negotiations between American Express Co. and Citicorp, though nothing was concluded.

Merrill Lynch has worked with First USA since it negotiated the Dallas company's leveraged buyout from parent MCorp. in 1989. It also has been First USA's bond underwriter and, until recently, was a major shareholder in the firm.

Monty Blanchard, managing director at Merrill, said the deal with Banc One was consummated quickly.

Negotiations began in early December, he said, when William P. Boardman, senior executive vice president at Banc One, called First USA chief executive John C. Tolleson. The two sides began meeting Dec. 10 and exchanged proprietary financial information Jan. 2. The companies' boards approved the deal Sunday.

Banc One agreed to pay a whopping 5.67 times book value, or 20.2 times First USA's estimated earnings for 1997. The deal is a pooling transaction and will be 7.3% dilutive to Banc One shareholders in 1997, officials said.

Banc One's stock plunged 8% Monday on news of the deal, though it partly recovered Tuesday. First USA soared 24% Monday and continued to rise Tuesday, while other credit card specialists also posted strong gains.

"The deal makes sense for Banc One if credit cards continue to grow," said one investment banker. "A lot of people believe they will, but projections are so high you have to wonder what will happen if there's some kind of economic downturn."

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