Continuing an acquisition tear, Wachovia Corp. has agreed to buy Florida-based 1st United Bancorp for $222 million in stock.
The deal, which follows back-to-back acquisitions in Virginia, would give Wachovia its first banking presence in Florida and thrust it into a heated battle for market share with some entrenched leaders.
The $820 million-asset 1st United, based in Boca Raton, has 33 banking offices in four prosperous Florida counties: Palm Beach, Broward, Brevard, and Martin. Barnett Banks and First Union Corp. are both highly active in the area.
L.M. "Bud" Baker, chief executive officer of the Winston-Salem, N.C.- based company, acknowledged that he faces a competitive struggle.
"This will not be easy," he said. "But Wachovia has grown up over the years in one of the most competitive banking markets that exists in the United States, so you begin to understand what competition is all about."
Wachovia, with $48.5 billion of assets, had sat out the merger game for more than five years until June, when it stormed into Virginia. With those deals and the Florida move, Wachovia has agreed to plunk down more than $3 billion.
"We intend to build a significant presence in Florida," Mr. Baker said.
The deal price, equal to about three times book value, was termed fair by analysts. They added that 1st United's markets represent an appealing beachhead in the state.
"These are some of the highest per capita-income counties in the state, and they continue to be high-growth counties," said John Milstead, executive vice president of the Florida Bankers Association. "That's a pretty good place to start."
Analysts said the attractiveness of 1st United's markets made the deal a savvy strategic move for Wachovia.
Edward R. Najarian, an analyst with Wheat First Butcher Singer, added: "The price is very fair, given the location of the franchise they bought. That is a very upscale location in Florida."
Wachovia officials said earlier this year that they planned to make a move into Florida to extend the franchise, which runs through the Carolinas and Georgia. But first the company turned to Virginia.
In June Wachovia inked a $542 million deal to buy $2.1 billion-asset Jefferson Bankshares in Charlottesville. Two weeks later the company announced a $2.3 billion deal for $10.6 billion-asset Central Fidelity Banks Inc., Richmond.
When completed, those deals will make Wachovia a dominant player in Virginia, a state where it has had virtually no banking presence.
Analysts and observers said an equally aggressive acquisition plan could be on the drawing board for Florida. However, Mr. Baker would only hint at future expansion possibilities.
"'There are rich opportunities across the state of Florida, and longer term, we'd be interested in looking at those," he said.
Wachovia and 1st United began discussions in April, when the smaller company decided to seek out a buyer. 1st United needed a bigger partner to stay technologically competitive, said Warren Orlando, its chief executive officer.
The agreement calls for a tax-free exchange of between 0.3 and 0.366 shares of Wachovia common stock for each 1st United common share, equaling about $20.875. Wachovia said it would repurchase up to 3.5 million of its outstanding shares in connection with the deal.
Wachovia officials said the deal would not dilute earnings in 1998 and would have a positive impact in 1999. One-time charges associated with the deal total about $3 million. Wachovia estimated revenue enhancements of about $1 million.