Shawmut, Bank of Boston Drop
Shares of Shawmut National Corp. and Bank of Boston Corp. fell in heavy trading Monday in reaction to press reports about a planned merger between the New England companies.
In late afternoon trading, the stocks of both companies were down more than $1 a share in heavy trading. Shawmut fell 11% to $8.875, and Bank of Boston dropped 11.4% to $9.75 per share. The companies shrugged off a request by the New York Stock Exchange to comment on the volume.
Bank Boards Expected to Meet Soon
The heavy trading in both stocks indicated that investors were disappointed with the reported terms of the deal, which would offer 0.87 of a share of Bank of Boston stock for each share of Shawmut. A well-placed source said the companies' boards expect to meet and approve the merger within 10 days.
The two banks plan to raise $625 million of new capital -- $500 million through a rights offering of discounted shares to current common stockholders and $125 million in a preferred stock offering, the source said. Under those terms, dilution could reach 35% for shareholders of both companies.
"It's a tough sell in this environment," said James Moynihan, an analyst based in Boston for Advest Inc. "It's not an easy deal, and not a done deal yet."