Victoria Bankshares of Victoria, Tex. The deal is the latest and one of the biggest in Norwest's slow-but-sure campaign to piece together a large branch network outside Texas' major urban markets. Minneapolis-based Norwest, which has completed 13 Texas acquisitions in the past two years and has two others pending, said it would issue 1.05 shares of its common stock in exchange for each share of Victoria's, amounting to a 14% premium. The value of the transaction would be about $290 million. On Monday, when the deal was announced, Victoria's share price, which had recently been bid up on takeover expectations, fell $4.25 to $31.75. Norwest closed Monday at $31.875, down 62.5 cents. With Victoria's $1.9 billion of assets, Norwest's Texas total would be nearly $7 billion, or about 10% of the $71.4 billion it reported as of Sept. 30. Its largest previous acquisition in the state was First United Bank Group, a New Mexico-based company that had about half its $3.9 billion of assets in Texas. Victoria was one of the largest remaining independent banking organizations in Texas. It serves primarily rural areas in the south central portion of the state. "We like Texas a lot," said Norwest chief executive officer Richard Kovacevich. "We particularly like central and west Texas. We think (they have) the types of customers and banking needs very similar to the rest of Norwestland." Norwest has chosen to stay away from the major metropolitan markets dominated by such banks as NationsBank and Banc One Corp. The strategy, analysts say, gets Norwest into places amenable to its corporate style and allows it to get bigger without swallowing large institutions that have the potential to dilute earnings. "It's a typical out-of-the-megalopolis acquisition for Norwest," Ben Crabtree of Dain Bosworth in Minneapolis said of the Victoria purchase. Mr. Crabtree said it is too early to tell how the strategy will play out in Texas. It usually takes the company three or four years to turn acquisitions around, and it has completed at least one a month in Texas since April. "That's not inconsequential," Mr. Crabtree said. "All of a sudden you turn around at the end of the year, and they've grown 10%." Norwest's penchant for smaller, lower-cost purchases is well suited to Texas, which, after consolidations, has few big targets left. Besides Victoria, the $3.7 billion-asset Cullen/Frost Bankers of San Antonio is the only Texas-based bank of any size likely to be taken over, analysts say. Markets that aren't saturated, such as San Antonio and Austin, are still viable for newcomers such as Norwest. And Mr. Kovacevich sees potential in some very small markets. Victoria Bankshares would give Norwest 42 banking offices - double its current total - in towns such as Bastrop and Bryan, Smiley and Sugarland. In most, Victoria is first or second in market share. Michael Durante, an analyst with McDonald & Co., said Victoria is a good fit for Norwest. Earnings have been under pressure at the Texas bank, he said, which made the pricing more attractive.
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