Stocks: A Missouri Statute May Torpedo Boatmen's Chances to Be Bought

Boatmen's Bancshares is high on almost everyone's takeover list - but a deal could run afoul of Missouri law.

With names like Norwest Corp. and Banc One Corp. bandied around as potential suitors, the St. Louis-based bank's stock price has soared on takeover speculation.

But some observers say a 13% cap on the share of Missouri's deposits that a single acquirer can buy will stand in the way of any deal. Boatmen's controls 15.7% of the state's deposits as measured under the law, which counts bank and thrift as well as credit union deposits.

"We have spoken to Missouri regulators who believe Boatmen's cannot be acquired - period," said George Salem, a bank analyst with Gerard Klauer Mattison.

Mr. Salem downgraded the bank from "buy" to "hold" recently, saying the takeover speculation that had buoyed its stock price was unwarranted because of the deposit cap.

Missouri's commissioner of finance, Earl Manning, conceded the deposit cap was a topic of discussion within state regulatory circles, but said unless there was an application before him proposing a buyout of Boatmen's, he could not comment.

Other analysts said state regulators had indicated to them that the deposit law would not prevent a purchase of Boatmen's if the acquiring bank was making its first purchase in the state.

"The general sense is the statute is an anti-concentration statute, and not a change-of-control statute," said Thomas Kinsock, a partner in the St. Louis-based law firm of Gallop, Johnson & Neuman.

"The spirit, and perhaps even the letter of the statute," he added, would not prohibit a takeover of Boatmen's.

Still, Mr. Kinsock conceded the statute would still be open to interpretation by regulators. A loophole in the statute allowed Boatmen's to exceed the level through Resolution Trust Corp.-assisted transactions.

If Boatmen's were the target of an unfriendly deal, then the bank could point to the statute to try to avoid the takeover, Mr. Kinsock added.

Boatmen's, which did not return calls seeking comment, is widely seen as a choice entry vehicle into Missouri.

With an attractive nine-state franchise throughout the Midwest and Southwest, and $36 billion of trust assets contributing 10% of revenues, the bank is high on most analysts' takeover lists.

Come October, when the national interstate banking bill becomes law, Missouri will be open for the first time to out-of-state acquirers. Shares of many Missouri banks have risen on takeover speculation.

The national law set state deposit caps at 30% for states without such laws, but left current state deposit caps.

While Boatmen's just a few months ago was viewed as perhaps too big to be taken over with $33 billion of assets, the consolidation game has changed. After the sale announcements by First Fidelity Bancorp. in New Jersey and Shawmut National Corp. in New England, Boatmen's is suddenly seen as too small to survive.

The bank's chief executive, Andrew Craig, is expected to retire soon, adding to speculation about the bank's future. Boatmen's management, however, is viewed as wanting to stay independent.

Whether regulators or lawmakers change the deposit law, the uncertainty surrounding it could still keep buyers away, said Mr. Salem.

An acquirer could always divest deposits, said James Weber, a bank analyst with A.G. Edwards & Co. What's more, Mr. Weber pointed out that there has been a move in Missouri to increase the deposit cap to the national law's 30% level, and he predicted the move would succeed.

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