Union Planters Corp. said Tuesday it had agreed to buy Peoples First Corp. of Paducah, Ky., for $380 million in stock.
Memphis-based Union Planters is paying about 2.34 times book value and 17.5 times estimated earnings for 1998.
When the deal is completed, which is expected in the second quarter of 1998, Union Planters would add $1.5 billion of assets, 26 branches in western Kentucky, and three offices in Clarksville, Tenn.
The acquisition fills a gap in $14.8 billion-asset Union Planters' geographical spread between southeast Missouri and northwest Tennessee, company officials said.
Union Planters owns a $120 million-asset bank in Franklin, Ky., but Peoples First offers a much deeper penetration in the Bluegrass State.
"It fits very nicely with what we already have in Missouri and Tennessee," said Union Planters chief financial officer Jack W. Parker. "They've got some branches within 40 miles of ours. If you didn't have these state boundaries, it's clearly within what we've defined as our markets."
The acquisition will not have a big impact on the Kentucky market structure, as Union Planters will rise just one place in market share, to No. 8. But it gives the Tennessee-based company shares of at least 25% in seven Kentucky counties. In Peoples' hometown of Paducah, Union Planters will rank first with 40.3%, said Mr. Parker.
"We like to acquire community banks with big market shares in their communities," said Mr. Parker.
Because Union Planters pursues a decentralized community banking strategy, it is content to carve its profits out of areas shunned by larger institutions, and Kentucky is no exception. None of the state's five largest institutions, including PNC Bank Corp. and Banc One Corp., have significant market shares in the western Kentucky counties that Union Planters will be entering, said Mr. Parker.
Hope Willard, an analyst with J.C. Bradford & Co., said the price appeared to be in line with market trends. Though the deal is relatively small, she said it is another solid step for Union Planters.
"It's a contiguous-market transaction, generally in line with the company's long-standing strategy of acquiring community banks," Ms. Willard said. "This has truly become a line of business for them. (Union Planters) has proven time and time again the ability to profitably operate community banks."
Terms of the tax-free exchange call for the exchange of each Peoples share for 0.6 of a share of Union Planters common stock. The price of $36 a share is based on Union Planters' Monday closing price of $60. The acquisition will be accounted for as a pooling of interests.
Union Planters has six other acquisitions pending, totaling $2.5 billion of assets. The largest of those deals, Capital Bancorp. in Miami, Fla., will add about $1.9 billion of assets. It is expected to close Dec. 31.
