Its headquarters are still in Alabama, but Colonial BancGroup Inc.'s latest deal makes it very much a Florida company.
Colonial said Tuesday that it had agreed to pay $233 million in cash and stock for the privately held Union Bank of Florida, the largest acquisition to date for the Montgomery company.
The $17.6 billion-asset company has bought nine banking companies in the state plus a 13-branch Florida network since the beginning of 1998. Adding Union Bank would push its assets and deposits there to more than half of the company total.
Colonial's president, W. Flake Oakley 4th, left the door open to more acquisitions, although he said Colonial does not need any more of them. "If an opportunity comes along, we will certainly take a look at it," particularly in Florida, he said in an interview.
The Union deal, which is to close in the first quarter, is part of a strategy "to gain a strong presence in some of the highest-growth markets in the country - Florida being one of those," he said.
Union had $1.1 billion of assets and $687 million of deposits on June 30. The company, which is based in the Broward County city of Sunrise, 30 miles north of Miami, has 18 branches.
Colonial said the deal would move it up three notches in the Florida deposit market, to seventh place. It had $4.7 billion of deposits in the state in mid-2003 and ranked 10th, according to the Federal Deposit Insurance Corp. data. Just ahead of it were Golden West Financial Corp., at No. 7; Citigroup Inc. at No. 8; and Ohio Savings Financial Corp. at No. 9.
Buying Union would bring Colonial's Florida deposits to $6 billion, 58% of its corporate total. But Bank of America Corp. is way ahead in the state, at $53.7 billion, as is Wachovia Corp. at No. 2, with $50.7 billion; both are based in Charlotte.
Colonial said Union would also bring it $574 million of loans in Florida.
The Alabama company operates 294 branches in Florida, its home state, Georgia, Nevada, and Texas. It has completed 19 deals in Florida (including several before 1998) - more than in any other state except Alabama.
Colonial has been "gradually increasing the size of the acquired institution," said chairman and chief executive Robert E. Lowder in a press release. As a result "we are very confident in our ability to integrate the next one and to take full advantage of cost savings in each case."
Kevin Fitzsimmons of Sandler O'Neill & Partners LP speculated in a report issued Tuesday that Colonial's next deal would probably be in the Florida panhandle. In May it bought P.C.B Bancorp Inc. of Clearwater, near Tampa, for $141 million; P.C.B had 16 branches, $547 million of deposits, and $494 million of loans.
Mr. Fitzsimmons said Colonial expects Union to add slightly to earnings next year. He said Colonial said that it plans to cut costs by consolidating back offices and systems.
Analysts said the Union deal, at 2.94 times book value and 21 times expected 2004 earnings, is pretty pricey.
Colonial is "just so hungry to continue to grow in Florida," said Jay Cunningham of Hibernia Southcoast Capital Inc., a unit of the New Orleans banking company Hibernia Corp.
Analyst James M. Schutz at Sterne, Agee & Leach Inc. in Birmingham, Ala., agreed that the deal is "pretty expensive" but said it the price is "not terribly out of line" for Florida.
Mr. Cunningham said he plans to keep a "sell" rating on the Colonial. It has done "at least 30 acquisitions over the past decade, and once you make your adjustments on stated versus organic growth, you find out that the organic growth rate is not as high as the stated," he said.
Analysts are divided on whether Colonial is itself a target, as has been reported.
With over 50% of its assets in Florida "it probably is an extremely valued franchise if it decides to be acquired," Mr. Schutz said. "It's becoming increasingly appealing."
But Hibernia's Mr. Cunningham said he does not think Mr. Lowder is itching to sell. "If your bank is on the block, I'm not really sure why you would continue to be doing acquisitions," he said.
Mr. Oakley declined to discuss the speculation. "We are going to keep doing what we think is best to build the value of the bank," he said.
On Tuesday, Colonial's shares fell 0.5%.
