Centura Banks Inc. announced its biggest acquisition deal on Monday, saying it would buy Triangle Bancorp of Raleigh, N.C., for $608 million of stock.
The deal, valued at 3.6 times Triangle's book value and 24.3 times its earnings, would create the fifth-largest banking company in North Carolina, with $11.1 billion of assets. It would give Centura 80,000 additional households and would double its deposits in the Raleigh-Durham metropolitan area.
"We believe we have built a strong company that knows how to grow revenues," said Cecil W. Sewell, Centura's chairman and chief executive officer, in a conference call with analysts. "This deal greatly strengthens the franchise we have created."
Triangle has $2.3 billion of assets and 71 branches in the state. About one-third of its deposits are in the fast-growing Raleigh area.
Centura, with $8.8 billion of assets, has 227 branches in North Carolina, South Carolina, and Virginia. Based 60 miles east of Raleigh in Rocky Mount, Centura is regarded as a strongly performing midsize holding company that has run up against limits to its growth.
"They need new households, and they are getting them in a low-risk, in-market transaction," said Vernon C. Plack, an analyst at Scott & Stringfellow Inc. in Richmond, Va. "It's a great buy."
The companies expect to divest up to $300 million of deposits in order to gain regulatory approval for the deal, which they hope to close by the end of next year's first quarter.
"This is the kind of a deal I like to see," said John B. Moore, senior vice president at Wachovia Securities Inc. in Charlotte, N.C. "It's an in-market transaction, which should mean better cost savings, and it gives Centura a major presence in some urban areas."
Centura averaged profit of $43.29 per household per month in 1998, up from $38.21 per month in 1996. Triangle, by comparison, earned $35 per household per month.
Centura said it expects to cut costs by $32 million. The company will close up to 26 branches and expects to lay off an undisclosed number of employees.
Centura has been an active acquirer, leading some observers to wonder whether it is biting off more than it can chew. Formed in 1990 by the merger of Peoples Bancorp and Planters Bancorp, Centura has bought 13 banks in the past five years but, until Triangle, none bigger than $585 million-asset First Coastal Bankshares of Virginia Beach.
"This is Centura's first sizable transaction, which is reason for concern," said David Trone, an analyst at Credit Suisse First Boston Inc. in New York. "We are increasingly seeing mergers go awry, and the market is killing the stock when that happens."
On Wall Street, Centura's stock closed down 4% at $49.875 a share, and Triangle finished at $21.50, up 30%.
Mr. Sewell said he believes the integration will be eased by the prominent roles given to members of Triangle's management team. Centura's board will add seven Triangle representatives and balloon to 30 directors. Michael S. Patterson, Triangle's chairman and chief executive officer, will succeed Mr. Sewell as chairman.
Mr. Sewell and Mr. Patterson previously worked together at the Peoples Bancorp.
The deal would end an impressive run by Triangle. Founded in 1988, it strung together 10 deals in the last five years to surpass $2 billion of assets. The decision to sell, Mr. Patterson said, was motivated in part by the technology spending required to keep growing.
"We were in the process of looking at some significant and costly investments for the future," he said. One example would be a $2 million investment on a new network that Mr. Patterson said would be needed next year to remain competitive.
Analysts said merger speculation in North Carolina will now shift to CCB Financial Corp. of Durham and First Charter Corp. in Concord.
CCB, with $7.7 billion of assets, is a Centura rival and peer that analysts said might also have been interested in Triangle.
"I would think CCB would have liked to have taken a crack at buying Triangle," said Mr. Plack. "There are very few opportunities to buy left out there."
First Charter is one of those few. At $1.8 billion of assets, it is the only independent community bank remaining in the state with more than $1 billion of assets and a presence in metropolitan markets.
Analysts said First Charter is probably not for sale right now because it is still integrating a relatively large merger of its own. However, when the time comes to sell, Triangle's disappearance should heighten demand for that company.
"In the game of musical chairs, there is some value to being the last chair," said Mr. Moore of Wachovia Securities.