NCNB, C&S Plan to Join Forces, Creating No. 3 Banking Company

NCNB Corp. chairman Hugh L. McColl Jr. exulted Monday in his greatest personal triumph as his banking empire, already the seventh-largest in the country, concluded a widely anticipated merger agreement with C&S/Sovran Corp.

NCNB agreed to buy C&S/Sovran for stock valued at $4.3 billion - an industry record, exceeding by $2 billion the price in the Chemical Banking Corp.-Manufacturers Hanover Corp. merger announced last week.

Becoming 3d-Largest

The deal will make NCNB the third-largest U.S. bank holding company, after Citicorp and the new Chemical, and it will give Mr. McColl his long-sought regional banking colossus. Its domain will stretch from Maryland through the South to Texas.

Clearly taking the upper hand in the transaction, Mr. McColl was designated chief executive officer of the combined enterprise, which will have $118 billion in assets and 1,900 full-service banking offices in nine states and the District of Columbia.

Bennett A. Brown, chairman of C&S/Sovran, will be chairman of the board of the merged company. He and Mr. McColl will provide "broad direction and leadership" for the combination, they said in a joint statement. Meanwhile, three top officers of C&S and two from NCNB will take "direct responsibility for the operations of the new company."

There was some rhetoric about Mr. McColl and Mr. Brown's being "teammates" at a Monday conference for stock analysts, but Mr. McColl, not Mr. Brown, fielded most questions.

"They're not fooling anybody - NCNB has acquired C&S/Sovran," said Thomas K. Brown, banking analyst at Donaldson, Lufkin & Jenrette Securities Corp. in New York.

NCNB and C&S/Sovran will take a new name - NationsBank - that had been tested and championed by Mr. McColl and NCNB. It will be based in Charlotte, N.C., NCNB's headquarters.

The name "makes it perfectly clear what this company is," said Mr. McColl. He called it "an institution that is unique in American banking and a company that is strategically positioned to compete successfully in the U.S. and in the world."

No Further Deals Planned

Asked by analysts about future acquisitions, Mr. McColl said, "You guys are seldom satisfied. We've got enough to do for awhile. I've accomplished what I set out to do, building a franchise from Baltimore to Miami, with a swing west to El Paso."

Pressed further on the issue, he said: "It may be possible that the government will thrust something else upon us to buy, but we're not looking."

In negotiations that NCNB and C&S/Sovran acknowledged had been under way since June 26 and that ended in New York last weekend, NCNB agreed to exchange 0.84 of a share of common stock for each C&S/Sovran share. Based on last Friday's NCNB closing price of $37, the price per C&S share would be $31 - $5.125, or 20%, above its Friday close of $25.875, and 40% above book value.

C&S/Sovran's share price rose $1.625, to $27.50, Monday, but NCNB's fell $2, to $35.

Haggling over Price

A source close to C&S/Sovran said the company had fought for an exchange ratio of more than 0.85 a share, which would have given C&S/Sovran shareholders more than 50% of the merged company. NCNB, which opened negotiations last month with a 0.75 exchange offer, raised it to 0.785 Friday. At that point C&S/Sovran, represented by Mr. Brown and chief operating officer Dennis C. Bottorff, reportedly threatened to walk.

Mr. McColl, who was personally handling NCNB's side of the pricing negotiations, then offered 0.84 as a compromise. He insisted he would not cross the 50%-control threshold, and C&S/Sovran accepted the price, the source said.

The bid translates into a premium of $1.3 billion to $1.7 billion over C&S/Sovran's book value, depending on credit-quality assumptions, said James H. Hance, NCNB's chief financial officer, who will take the same job at NationsBank.

Mr. McColl said that he has obtained a "no-walk" deal, meaning that neither party can back out.

Fast Regulatory Review

He also said the Office of the Comptroller of the Currency has put its review of the two banks "on a fast track, piggybacking their investigations." He privately told some analysts that approval could come within 60 days, though he publicly said state banking regulators could offer the highest hurdles.

The agreement came two years after Mr. McColl made an unsolicited and rejected bid for Atlanta-based Citizens and Southern Corp., which later merged with Sovran Financial Corp. of Norfolk, Va.

Broad Strategic Ambition

This time around, Mr. McColl's timing was impeccable: launched the bid when NCNB's stock price was relatively high and C&S/Sovran's was languishing because of bad commercial real estate loans in the Washington area.

The name "NationsBank," which has been in use for more than a year by NCNB's Delaware-based credit card bank, underlines Mr. McColl's broader strategic ambitions.

An amalgam of the names - C&S/Sovran NCNB - "somehow didn't have a phonetic ring to it," Mr. McColl quipped in his talk to analysts.

How competitive NationsBank will be is still a question mark. Kidder, Peabody & Co. analyst Charles Peabody, who has been critical of NCNB's performance, said it depends on three unresolved issues: credit quality, management continuity, and cost savings.

In their presentation to securities analysts Monday, Mr. McColl and Mr. Brown said they expected NationsBank to achieve about $350 million in cost savings within three years of the merger, which is scheduled for yearend. They expect to cut 4,800 to 6,000 employees, or up to 10% of the combined entity's 60,000 workers, mostly through attrition.

The New Hierarchy

NationsBank will be run by Mr. McColl and Mr. Brown at the top level with five top officers from the two constituent banks serving under them. The five officers are: Mr. Bottorff, C&S/Sovran's president; Hugh M. Chapman, C&S/Sovran vice chairman; Albert B. Gornto Jr., chairman of the executive committee at C&S/Sovran; NCNB vice chairman Timothy P. Hartman; and James W. Thompson, also vice chairman at NCNB.

Mr. Hance will retain the post if chief financial officer at NationsBank, suggesting that C&S/Sovran chief financial officer James D. Dixon is a clear loser from the merger.

Another possible loser is Mr. Bottorff, 46, who had been slated to be C&S/Sovran's chief executive after Mr. Brown retired. Mr. Bottorff has reportedly gotten an attractive compensation package as a result of the merger agreement, but he will not be among the 10 C&S/Sovran board members added to NCNB's 21-member board.

Mr. Hartman, 53, Mr. McColl's long-time second in command at NCNB, may be dropped from the NationsBank board, which would seem to indicate that he and Mr. Bottorff are competing to succeed Mr. McColl, who is 56.

But many analysts believe the real successor-in-waiting will be the current president of NCNB's retail bank, Kenneth Lewis, 44. Mr. Chapman, 58, and Mr. Gornto, 61, are both regarded as transitional figures.

PHOTO : Two Superregional Empires Combine

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