Star Banc Corp. chairman and chief executive officer Jerry A. Grundhofer said Monday his company is ready for another deal.
In the wake of last Friday's closing of the $641 million acquisition of Great Financial Corp., Louisville, Ky., Mr. Grundhofer said in an interview that $14 billion-asset Star has the ability to handle another merger.
It could happen "if we find a deal that fits in our strategy and meets our criteria," Mr. Grundhofer said.
He added that any new merger would have to add immediately to his Cincinnati-based company's earnings.
Although Great Financial's geographic reach was limited to Indiana and Kentucky-Star operates in those two states plus Ohio-Mr. Grundhofer said he does not consider himself confined to this area.
Star would consider expanding to adjacent states and even farther afield in the Midwest or South, he added.
"Are we going to fly across 15 states?" Mr. Grundhofer asked. "Probably not, but we could hopscotch over some states."
He declined to identify where he would be most interested in going, but analysts said Tennessee, Illinois, and Wisconsin would all be logical.
Fred Cummings, an analyst at McDonald & Company Securities in Cleveland, said Star's stock is valued at 21 times its estimated 1998 earnings. It could reasonably acquire a bank or thrift of more than half its size, in the $7 billion to $10 billion range, he said.
"In this game, you have to be opportunistic," Mr. Cummings said.
But as Mr. Grundhofer noted, Star has been picky about acquisitions. Although it has considered buying other banks, it has not been willing to bid the high prices that are winning auctions, he said.
"We've been disciplined," Mr. Grundhofer said. "We like low-risk transactions."
Great Financial, a $3 billion-asset thrift company that had been changing its product mix to make it look more like a consumer bank, was less attractive to other buyers. But that did not discourage Star.
On the contrary, Great Financial's lack of commercial banking and trust products should open up opportunities, Mr. Grundhofer said.
Star also hopes to bring its more sophisticated consumer products and technology to Great Financial's markets.
Star plans to more than triple Great Financial's automated teller machines by adding 107 to its network in Louisville and central and western Kentucky.
Analysts also noted Star's aggressive marketing strategy, which has helped it boost revenues in recent years even when the company did no significant acquisitions. It has stuck to its commitment not to overpay in a merger, said Eric Rothmann, an analyst at Stephens Inc., Little Rock, Ark.
"They don't pay up just to get a trophy" bank, Mr. Rothmann said. "They could go for a trophy piece and build upon it, but they are not going to pay big prices."
Mr. Grundhofer said there are two sides to the high prices being paid in bank deals. Banks are selling at high multiples of their book values and earnings, he said, but the buyers are also highly valued and, in some cases, use inflated stock prices as currency to make deals.
"I think it's very frothy," Mr. Grundhofer said. "Deals are being done at very lofty premiums. On the other hand, they're using elevated stock prices."
Mr. Grundhofer said book values and price-earnings multiples are still important benchmarks but that Star looks for a sizable return on its investment. The bank expects a 10% to 13% return on any deal it makes.
"It's not how big it is-it's the economics of the deal," Mr. Grundhofer said.
A number of banks that might interest Star will be for sale this year, analysts said. But as far as Mr. Grundhofer is concerned, there will be no deals for dealing's sake.
"We're going to make our numbers whether we do something or not," he said.