Shares of PNC Bank Corp. rose in heavy trading Wednesday after a Lehman Brothers report said the Pittsburgh bank's $2.84 billion acquisition of Midlantic Corp. may be voted down by shareholders.

PNC shares rose 62.5 cents to $61.50 after they were moved onto Lehman's recommended list, and analyst Michael Mayo predicted PNC would become a takeover candidate, at $36 to $40 a share. More than 5.3 million shares changed hands, compared with average daily volume this year of 655,000 shares.

Mr. Mayo said shareholders are "unusually upset" over management's decision to forgo a 10% stock buyback in favor of "expensive, more risky acquisitions." He said dissatisfaction is especially strong in the wake of interest-rate related problems last year that resulted in a $100 million charge and stalled the bank's earnings growth.

A bank spokesman, noting that merger proxies have yet to go out, said PNC is unaware of any shareholder plans to vote against the Midlantic deal. Shareholders, willing to speak only on an anonymous basis, confirmed that there is some opposition, but stopped short of predicting the deal would fail.

"If a deal is seriously flawed, given the alternatives - in this case a share buy back - management should not assume large shareholders would necessarily vote with them," said one investor, who noted "a new age of shareholder activism" has begun.

Another large shareholder said however, there is not enough opposition to kill the deal. Unlike a recent failed deal between CoreStates Financial and Bank of Boston "this was not irrational, though it is a high price," this shareholder said. "Without saying how we might vote, (Mr. Mayo's report) comes as a shock to me if it is true."

Joseph Duwan, who follows PNC for Keefe, Bruyette & Woods, said it is rare for a bank merger to be voted down, and noted that PNC needs only a majority vote to prevail.

He also praised the merger plan: "We think the cost savings alone would eliminate earnings dilution, and the icing on the cake is the financial benefits (including) an improved deposit funding mix, an improved earning asset mix, and excess capital that Midlantic brings to the table."

Famed investor Warren Buffett, however, has been rumored to be dumping shares of PNC. Mr. Buffett, who controls 8.3% of the shares, was unavailable to comment.

Observers pointed out that PNC's largest institutional shareholder, with a 7.9% stake, is Capital Research & Management - a group thought to have backed a slate of dissidents elected to the board of the Student Loan Marketing Association earlier this year.

Shares of Midlantic Corp. rose 87.5 cents to $53 on the Lehman report. Observers said Midlantic's stock would be hurt if the deal falls through, but explained the rise by pointing out that its shares have traded in tandem with PNC's since the merger announcement.

Separately, NationsBank Corp.'s stock won positive ratings Wednesday, despite misgivings about its pricey $1.6-billion acquisition of BankSouth Corp.

NationsBank shares gained 62.5 cents, to close at $61.50.

Nancy Bush, an analyst at Brown Brothers Harriman put a "trading buy" on the Charlotte, N.C., holding company, saying investors had overreacted to the high purchase price and that the stock could rebound over the next three months.

The buyout announcement also prompted an upgrade of NationsBank to "buy" from "neutral" by Richard Bove of Raymond James & Associates. Mr. Bove said he opposes the deal, but was convinced during his discussions with bank management that he had underestimated the NationsBank's earning potential.

"I think the combination of these two banks is a major nonevent," he said. "I was excoriating them over how ridiculous the merger was. In (their) defense of what they were doing, it became evident that this company is earning more than anyone thought."

Mr. Bove, bearish about the banking industry, said NationsBank has more than $40 billion in cash and sellable securities, which will make it cheaper to fund new assets, offsetting the margin squeeze believes will afflict much of the industry.

Michael Ancell, of Edward D. Jones & Co., St. Louis, downgraded the stock of South Trust Corp. Birmingham, Ala., to "buy" from "strong buy." Noting Tuesday's 62.5 cent rise in South Trust's share price to $26.25 - a reaction to the acquisition of its southern neighbor - Mr. Ancell decided there was little potential for further appreciation in the stock, which had risen 44% from its low.

South Trust shares gained 43.7 cents to $26.68 on Wednesday.

Mr. Ancell said he is advising "caution" about further share-price appreciation for regional banks following the recent merger-inspired rally.

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