United Bankshares Inc.'s $201 million deal to buy Premier Community Bankshares Inc. in Winchester, Va., would appear to squelch speculation that United is a near-term takeover target.
But analysts said the Premier deal, which would fill a gap between United's branches in its home state of West Virginia and the metropolitan Washington and northern Virginia markets, would make United all the more attractive to a potential buyer.
The $6.7 billion-asset company, which has dual headquarters, in Charleston, W.Va., and Washington, said Monday that it plans to buy the $901 million-asset Premier for $34 a share in cash and stock, or 3.7 times Premier's tangible book value.
The deal would move United into three new Virginia markets - Winchester, Harrisonburg, and Charlottesville - as well as boost its market share in the outer Washington suburbs. It is expected to close late in the second quarter or early in the third quarter, at which point the Premier units Marathon Bank, Rockingham Heritage Bank, and Premier Bank would be merged into United Bank.
Richard M. Adams, United's chairman and chief executive officer, said it would be interested in buying more banking companies, primarily in the Washington area or Virginia, once the Premier deal closes. "But we would consider transactions in neighboring states," he said.
Analysts said that the market had speculated that United could be a takeover candidate, but that the Premier deal should end such talk for the near term. Mr. Adams would not comment, except to say that banking companies considering expansion in the Washington market probably would notice United. Thirty-eight of his company's 90 branches are in Washington or its suburbs.
"Certainly it's evident we're the second-largest independent franchise - after Chevy Chase [Bank] - in the metro D.C. market," he said. "So I think clearly we have an attractive franchise."
Steven E. Wilson, United's chief financial officer, said the company would do whatever is best for shareholders. "At the current time," he said, "we think that we're still building franchise value and that our shareholders are very happy."
David Darst, an analyst at First Horizon National Corp.'s FTN Midwest Research, said the deal price is high but "reflects the high-growth nature of the markets Premier is in."
For example, Premier has $215 million in deposits in Winchester, where the median household income is $41,068. The median is projected to increase by 17.1% in the next five years.
United has completed 26 deals since 1982. Its last one was the $112.2 million purchase of Sequoia Bancshares Inc. in Bethesda, Md., in October 2003. But this is one of its largest deals ever. Its only comparable purchase, in size, was the $208.4 million deal for Virginia's George Mason Bankshares Inc. announced in September 1997.
"Their strategy has been to aggressively acquire in the metro D.C. market," Mr. Darst said. "With this acquisition, they're following the growth that's in northern Virginia out into the Shenandoah Valley. It bridges the gaps between the two markets that they're in."
The deal would strengthen United's value significantly, he said, if it ever decides to sell.
Assuming a successful integration, Virginia would account for 52% of United's overall deposits, which should give the company a higher premium to market than it had with more of a West Virginia concentration, Mr. Darst said.
The deal price is 14% of United's market capitalization, he said, so it comes with some integration risk, particularly because the company plans to consolidate three banks into its own. "That's where they'll receive a significant portion of their cost savings," he said.
United is projecting $8.3 million of cost savings, or 30% of Premier's pretax operating expenses.
Donald L. Unger, Premier's president and CEO, would remain with United as the president of a newly created Virginia region.
The price is 21.3 times Premier's estimated 2007 earnings and is a 29.9% premium to core deposits. It also is a 68.3% premium over Premier's $20.20 per share closing price Friday.
Albert Savastano, an analyst at Janney Montgomery Scott LLC, said the deal price is at or above the high end of a range for comparable transactions but that the strategic rationale makes sense. It would make United the second-largest community bank in Virginia.
The deal metrics are a function of the operating environment, Mr. Savastano said. "In today's market, you have to pay a full price to get deals done," he said.
The premium over Premier's stock price is "a little surprising," he said, but Premier has been trading at a low multiple - about 1.6 times book value, compared with about 2.5 times for peers.
Premier's shares soared on news of the deal, closing Monday at $33.18. United's shares fell 1%, to close at $35.92.
