Other Banks in the State Suddenly Shine on Wall St.
The marriage agreement between Comerica Inc. and Manufacturers National Corp. could help force Michigan's other big players into mergers as well.
"It definitely puts pressure on all other players in the area," said Virginia A. Adair, a bank analyst at Merrill Lynch Capital Markets who covers the Midwest.
The market immediately began speculating, pushing up the stock prices of the state's four other largest banks.
That followed Monday morning's merger announcement, which took investors by surprise.
Shares of Comerica and Manufacturers held little or no takeover premium before Monday and both fell in price on Friday. "I wish I'd been buying them," said one trader on Wall Street.
Stocks Rise in Tandem
Both stocks took flight on the announcement, an indication that the Street views the deal as an immediate positive. Comerica was up $5, to $47.875, and Manufacturers was up $4, to $37.75, in afternoon trading.
The combined bank, to be called Comerica, will be only $1 billion in assets behind crosstown rival NBD Bancorp "and in some respects have a better franchise," said Ms. Adair.
Moreover, it will come close to matching NBD's vaunted credit quality.
Analysts and other observers suggested that NBD might counter the Comerica-Manufacturers deal by seeking to combine with Old Kent Financial Corp., based in Grand Rapids, Mich. Old Kent has probably reached the limits of expanding on its own, Ms. Adair suggested.
NBD was up 37.5 cents to $42.75, and Old Kent rose 75 cents to $32.25 on Monday. Volume in the stocks was higher than usual, though not at record levels.
Old Kent's Market Eyed
Old Kent has long been rumored as a takeover candidate for out-of-state banks viewed as likely to expand in Michigan. Banc One Corp., Columbus, Ohio, has been mentioned as a possible suitor.
There will also be "plenty of questions now" for the other pair of big banks in the state, First of America Bank Corp., Kalamazoo, and Michigan National Corp., Farmington Hills, noted Frank J. Barkocy, senior banking analyst for Advest Inc., Hartford, Conn.
First of America was up 25 cents to $27.375, and Michigan National was up $1.25 to $37.
Community Bank Franchise
First of America recently agreed to acquire Security Bancorp, Southgate, Mich. The move enhances its presence considerably, but it will nevertheless face new pressures now, Mr. Barkocy said.
First of America has moved to build a franchise of community banks in the Midwest -- particularly in Indiana, Illinois, and Michigan. Banking industry watchers have suggested it might be a candidate for combination with KeyCorp, Albany, N.Y., which has pursued a similar strategy in the Pacific Northwest.
Comerica made an unsolicited bid for Michigan National several years ago and some analysts and others had suggested before Monday's announcement that it might renew that effort. The chances of that happening soon are now remote, Ms. Adair said.
But Michigan National might be a tempting target because it is the only one of the major banks in the state to have experienced significant deterioration in its loan portfolio, suggested a lawyer who tracks developments in the industry.
"That would enable somebody to offer a price for them without backbreaking dilution [of the buyer's earnings per share], and it would be a price that could be earned back over a reasonable time," he said. Michigan National has stated consistently that it is not for sale, however.