Virginia Buyout Deal on Hold; Stock Liquidity Seen as Issue

Virginia's Premier Bankshares hit a snag last week in its bid to build market share in the churning southwestern part of the state.

A merger deal announced at midmonth by Bluefield-based Premier, one of the biggest banks in the area, collapsed.

The $763 million-asset company said there had been disagreements over the terms of its deal to acquire $44 million-asset First Commonwealth Bank, which is based in Wise.

None of the officials from either bank could be reached for comment.

"I think what happened is that the liquidity of Premier stock wasn't attractive enough," said Alan F. Morel, analyst with Hilliard & Lyons in Louisville, Ky. "When you're offering currency like stock, that currency has to be negotiable."

A sign that the stock was not as negotiable as desired was Premier's spread - an $18 offer price and a bid of $16.50 as of Monday, Mr. Morel said.

"That's pretty big for a bank wanting to buy other banks," he said. "To me, that's not a viable currency."

For a bank of Premier's size, a spread of half a basis point is normal, Mr. Morel said.

Others familiar with the situation said that First Commonwealth felt that the original terms of the deal - announced June 13 and calling for a one-to-one stock swap - were not sufficient, because the book value of First Commonwealth's stock was slightly higher than that of Premier's.

"I think these guys will come back to the table," said an observer who wished to remain anonymous. He said that acquiring First Commonwealth would neatly solidify Premier's presence in the southwestern Virginia market.

Though generally not considered a prosperous market, southwestern Virginia, wedged among four states, has been getting a bit of attention lately, analysts said. Such larger banks as NationsBank Corp. and First Union Inc., both out of Charlotte, have downsized their presence in the area recently, creating an opportunity for other regionals, they said.

Several out-of-state banks, such as First American Corp. of Nashville and One Valley Bancorp of Charleston, W. Va., have made recent forays into the area. Others, such as First Tennessee National Corp. of Nashville, and National Commerce Bancorp. of Memphis, are probably eyeing institutions in the area, analysts said.

"You wouldn't think that this area is that attractive, but for some in eastern Tennessee and in West Virginia it appears very fertile," said Charles J. Wittmann, analyst at Wheat First Butcher Singer in Richmond. "A lot of these guys think they can come in there and bank it."

Premier, for one, thinks it can succeed there, or at least beef itself up to attract the eye of possible suitors, analysts said. The bank has grown at least 15% in each of the past three years, in part by purchasing branches from NationsBank. Its board has a new chairman, Harris Hart 2d, who replaced N. Stanley King Sr. in April.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER