Post-Merger Nightmare Seen Unlikely for U.S. Bancorp

Now that First Bank System Inc. has completed its acquisition of U.S. Bancorp, it faces the difficult task of integrating the two companies.

That is no small job. Last Friday's transaction created a $72 billion- asset company that spans 17 states, from Wisconsin to Washington. It will be based in Minneapolis, First Bank's hometown, but bear the U.S. Bancorp name.

Observers wonder whether the integration will go as smoothly as NationsBank Corp.'s apparently seamless absorption of Boatmen's Bancshares. At the other extreme is the nightmare that Wells Fargo & Co. has experienced in its purchase of First Interstate Bancorp.

Two Dain Bosworth Inc. analysts in Minneapolis said U.S. Bancorp, with First Bank chairman and chief executive officer John F. Grundhofer at the helm as president and CEO, will get through the process with "minimal" revenue loss. In the same vein, Mr. Grundhofer promised minimal customer disruption in a speech last May in Chicago.

Analysts said U.S. Bancorp officials are well aware of Wells Fargo's difficulties. Wells' second-quarter earnings dropped 31% because of operational problems and business lost as a result of the First Interstate deal.

U.S. Bancorp officials are "using the Wells deal as a stick to keep people from becoming complacent," said analyst R. Jay Tejera. He said the company is extremely aware of any potential business disruptions.

Mr. Tejera and fellow Dain Bosworth analyst Ben Crabtree issued a report last month predicting that neither the U.S. Bancorp deal nor Washington Mutual Inc.'s acquisition of Great Western Financial Corp. would face Wells-like problems.

"We think Wells is the exception, not the rule," Mr. Tejera said in an interview.

The No. 1 reason U.S. Bancorp will be more successful is that it was not a hostile transaction, said Mr. Tejera. The aftermath of Wells' unfriendly takeover of First Interstate would chill any company contemplating a hostile deal, he said.

Ironically, First Bank tried unsuccessfully to be a "white knight" in the First Interstate saga.

Other reasons the U.S. Bancorp effort might go better include less complexity in the deal, the similarity of the partners' strategies and operating systems, a much smaller number of branch closings, fewer personnel changes, and the survival of the U.S. Bancorp name.

The analysts also noted First Bank's record of adeptly making acquisitions that add to earnings quickly.

First Bank branches will become U.S. Bank branches sometime in the first quarter of 1998, the company said. u

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