Paying a hefty premium to build its market share in Columbus, Ohio, Star Banc Corp. has bought $680 million of deposits and 24 branches belonging to the Ohio subsidiary of Household Bank.
Star Banc, based in Cincinnati, said Friday that it had agreed to pay $66.3 million cash for the deposits and branches - a whopping 9.75% premium on the deposits. In three branch sales last month, Household Bank got premiums ranging from 8% to 4%.
Richard K. Davis, executive vice president of Star Banc's consumer banking division, agreed that the price was "rich." But he justified it on the basis of Star Banc's need to build critical mass in Columbus.
Before the purchase, Star Banc had a 1.9% market share in the state capital, leaving it tied for ninth place. The Household deal will vault Star Banc into fifth place, with a 7% share.
"It moves us from sort of being in the market to being pervasive in the market," Mr. Davis said.
He also said that Household Bank had done an excellent job of putting its branches in attractive areas and building a commercial bank-like franchise.
Star Banc, which has $9.4 billion of assets, already had 20 branches in Columbus: 14 traditional and six in Kroger grocery stores. Mr. Davis said he expects Star Banc will consolidate five to 10 offices in the combined branch network.
The transaction will be "slightly" accretive to Star Banc's earnings this year, after the changeover is completed in July, he said.
The sale is the latest move in Household Bank's program to trim its far- flung branch network. In February, the Prospect Heights, Ill.-based subsidiary of Household International sold $2.9 billion of deposits and 90 branches in California, Maryland, and Virginia.
The Ohio sale leaves it with 61 branches and just more than $2.5 billion of deposits in Illinois and Indiana.
Household International spokesman Howard Adamski declined to say whether the four-branch Indiana operation is also on the block. But he did say the banking division's intent is to focus on its core franchise in Illinois.
"Illinois is our home base, and we intend to grow it," Mr. Adamski said. "We have no intention of getting out of the banking business altogether.