Wachovia Corp.'s agreement this week to buy Interstate/Johnson Lane Inc. for $230 million may herald a turnaround in the cost of securities firm acquisitions.

"Though one transaction does not make a trend, I think it's significant that Wachovia did not pay a premium," said Michael Mayo, a bank equity analyst at Credit Suisse First Boston.

"It's certainly possible that we'll see more of that," he said.

The agreement calls for a tax-free exchange of Wachovia common shares for all of Interstate's common stock, based on a ratio of $32 per share. Buyout rumors Tuesday had pushed the firm's stock price up $3, to $37. The agreement was announced after the market closed.

As with many brokerage stocks, Interstate's share price had plummeted from its high last summer of $41.25, reaching $23.125 Oct. 8 before rebounding on acquisition rumors.

Wachovia would pay 2.2 times Interstate's book value, a big comedown from some of the hefty valuations banks have put on securities firms in deals during the past year.

Until Wachovia's announcement, the $100 million paid by First Security Corp. of Salt Lake City for Van Kasper & Co. of San Francisco stood out as the biggest bank-brokerage deal since the stock market devalued financial services firms.

Harold Schroeder, a bank equity analyst at Keefe, Bruyette & Woods Inc., said he would have priced the firm closer to 2.6 times book value. "It was a good time and a good price and a good company," he said.

The banking company has also established a $23 million, three-year retention pool to be paid in stock options. It is to be divided among more than 150 employees.

But this deal wasn't simply a matter of market timing, said Robert McCoy, Wachovia's chief financial officer. "We've been looking at possibilities for the last couple of years, off and on, but the opportunity or the perceived need wasn't there," he said.

Pending regulatory approval, the acquisition is slated to close in the first half of 1999. The firm would be merged into the bank's section 20 securities subsidiary, which was established in June.

James H. Morgan, chairman of Interstate/Johnson Lane, is to become chief executive of the post-merger subsidiary, which would take the name Wachovia Securities Inc.

Mr. Morgan first contacted Wachovia in August to suggest the deal. He said the market volatility of the past two months had played no part in his decision.

Though the firm's stock suffered along with the brokerage sector as a whole, Mr. Morgan said brokerage business volume was up this fall. Interstate has 457 retail brokers in five southern states.

Mr. Morgan is slated to run the subsidiary's wholesale product divisions. Robert S. Kniejski, a Wachovia executive vice president, is to remain in charge of the bank's existing brokerage network.

A major attraction for executives at both companies was the similar geography of their markets. Both have good market share in the two Carolinas, Georgia, and Virginia.

Mr. McCoy agreed with analysts that Interstate, which does business in Florida but lacks offices there, could use the combination as an opportunity to make advances in that market, where Wachovia has a strong presence.

Interstate's brokerage network will be renamed IJL Wachovia and continue to report to Mr. Morgan, Mr. McCoy said.

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