SCNC Stock Rises on Talk Of an Offer By Wachovia
ATLANTA -- South Carolina National Corp.'s stock price has surged as much as 25% this month amid speculation about a possible acquisition by Wachovia Corp. of Winston-Salem, N.C.
Spokesmen for both banks declined comment Monday. But the logic of highly respected Wachovia, with $26.3 billion in assets, acquiring South Carolina National, with $7.1 billion in assets, is clear: Wachovia could establish a major retail presence in a neighboring state and control 42% of South Carolina's deposits.
Similar Speculation in Past
Nonetheless, analysts Monday downplayed the rumors, noting that such talk has surfaced frequently in the past.
Indeed, after rising more than 10% last week and breaking through their 52-week high, South Carolina National's shares closed Monday at $24.375, down 50 cents. Wachovia closed at $54.625, down 12.5 cents.
"There's no pressing need on the part of South Carolina National to sell itself," said Norman Jaffe, an analyst with Fox-Pitt Kelton in New York.
South Carolina National has recently been struggling with asset quality problems and is performing below its historical levels. In the first quarter, the Columbia-based bank reported net income of $8.4 million, down 46% from $15.7 million earned in the comparable period a year earlier.
Logic of the Deal
"Why, after producing some 20 years of good earnings, would you suddenly sell when you're having an uncertain period? It doesn't add up," said Henry J. Coffey Jr., banking analyst for J.C. Bradford & Co. in Nashville.
One of the strongest arguments in support of the rumors is the sheer power that Wachovia's own stock would have in an acquisition through a stock swap. With Wachovia's stock trading at almost 13 times earnings and at almost twice the company's book value, the strength of Wachovia's currency is second to none in the Southeast.
"The stock market clearly differentiates quality, and the market turmoil out there is strengthening the hand of the strong," said Gerard J. O'Meara Jr., an analyst with the Robinson-Humphrey Co.
Acquiring South Carolina National could allow Wachovia to achieve cost savings from the consolidation of technology, marketing, and certain business lines such as mortgage servicing and credit cards.
"By doing an interstate deal, you can still save money by consolidating your back offices," said Frank Anderson, banking analyst with Stephens Inc. in Little Rock.
Climate Favors Acquisitions
The speculation about a possible bid by Wachovia for South Carolina National comes at a time when rising stock prices have created a climate where acquisition rumors can flourish.
For the past several weeks, analysts have even debated whether NCNB Corp., Charlotte, might make a run at C&S/Sovran Corp., which is based in Atlanta and Norfolk, Va. [Graph Omitted]