Wachovia Corp. entered the merger game Tuesday for the first time in five years, announcing a $542 million acquisition deal that would give it a solid foothold in Virginia.
The deal for $2.1 billion-asset Jefferson Bankshares would give Wachovia 96 offices in some of Virginia's fastest-growing markets. The stock-swap transaction is expected to close by Oct. 31.
Jefferson, based in Charlottesville, has the No. 1 share of the deposit market there and also has a sizable presence in Richmond, where the state's three largest banking companies are based.
Jefferson is "in all of the parts of Virginia we like," L.M. "Bud" Baker, chief executive officer of Winston-Salem, N.C.-based Wachovia, said in an interview. "It provides a wonderful platform from which to grow."
With the announcement, Wachovia executives delivered on a recent pledge to reactivate an acquisition program that has been largely dormant since the company's 1991 deal for South Carolina National Corp. Wachovia bought that $7.1 billion-asset company for $835 million in stock.
Wachovia, which has $47.5 billion of assets, is a traditional darling of analysts, but recently it has taken some heat from them for sitting out the bank merger boom. Though many of its banking rivals have made aggressive efforts to expand their franchises in recent years, Wachovia has concentrated on internal growth, remaining largely within the Carolinas and Georgia.
Earlier this year Wachovia officials said they were finally ready to do some serious shopping, and named Virginia and Florida as appealing markets.
Mr. Baker said Wachovia settled on Jefferson because its culture and customer service strategies are very similar to Wachovia's. Jefferson, the fifth-largest banking company in Virginia, is run by O. Kenton McCartney, who worked for Wachovia for 16 years, until 1984.
Mr. McCartney, whose last job at Wachovia was vice president for financial institutions, would run the bank's Virginia operations.
Though some analysts had hoped for something bigger, the Jefferson deal was generally well received.
Jefferson "is not a gigantic bank, but ... it is nicely positioned around the state of Virginia," said John J. Mason, an analyst with Interstate/Johnson Lane, Atlanta. Wachovia "could have bought bigger, but they got going, they did something," he said. "It's a good, healthy step in the right direction."
One goal of the merger is to increase revenues. The deal is expected to add 2% to earnings by mid-1998.
There should be savings as well. The bank predicted it would cut about $18 million a year from Jefferson's expenses, 25% of projected 1997 costs.
Wachovia officials would not say how many jobs would be lost as a result of the deal, but they said some layoffs and branch closings are likely.
The deal is to be structured as a purchase for accounting purposes. It calls for a tax-free exchange of 0.625 share of Wachovia common stock for each common share of Jefferson.
Wachovia's stock closed at $62.25 Tuesday, up 12.5 cents.
Mr. Baker said Wachovia will continue to look for acquisitions, but branch-based delivery systems are not foremost in his mind.
"The world is changing rapidly and we will be changing the way we think about customers in the future. That may not mean you want to cover an entire state with branches."
Wachovia agreed to pay about 2.6 times Jefferson's book value. It plans to take a $19 million charge to cover the acquisition.
