Banc One Corp. buying First Bank System Inc.? Or how about BankAmerica Corp. buying Banc One? Or Chase Manhattan Corp. buying BankAmerica?
These are only three of 385 possible bank combinations posed by Salomon Brothers analyst Michael A. Plodwick in the latest version of his Merger Modeler report, the most comprehensive study of its kind produced on Wall Street.
Everyone is on Mr. Plodwick's list. Given the industry's ripe acquisition climate, he argues that there are virtually no banks that could not find themselves part of a deal.
Of course, some banks are a lot more likely than others to be involved in mergers, and the analyst identifies seven companies as the most probable acquisition targets in the next year: First American Corp. of Nashville, Firstar Corp. of Milwaukee, Huntington Bancshares of Columbus, Ohio, Mellon Bank Corp. of Pittsburgh, Mercantile Bankshares of Baltimore, Summit Bancorp. of Princeton, N.J., and Union Planters Corp. of Memphis.
Trouble is, while some of these names have been tossed around in the past, the companies say they're not for sale.
"We believe Mellon's independence provides the best framework for shareholder value," said Stephen Dishart, a Mellon spokesman.
Still, Mellon's mix of mutual funds, asset management, and corporate trust businesses is desirable to many banks and would make a lot of sense for the right price.
It would be a strategic acquisition for Bank of New York, for instance, but Mr. Plodwick says First Union Corp. is the most logical acquirer because of cost-cutting opportunities through branch overlap and because of the Charlotte company's desire to be a player in the mutual fund business.
Mr. Plodwick goes through each combination using stock prices as of early April, earnings per share estimates, and book values to figure how much cost cutting it would take to buy a particular bank at various prices.
So, if BankAmerica wants to buy Banc One, at say $55 a share, it would have to cut 20% of the Columbus, Ohio, company's costs and expect 2% dilution to earnings. That's based on a Banc One stock price of $39.88.
Is it plausible? "It would go a long way toward establishing BankAmerica as a truly national banking company," according to the report. Moreover, it would build a strong midwestern presence around BankAmerica's corporate banking operations in Chicago, establish BankAmerica as a major player in Texas, and would create one of the biggest credit card operations in the nation.
Other Banc One suitors? Mr. Plodwick says Banc One is one of the country's premier financial services companies and would fit well with First Chicago NBD Corp., First Union, NationsBank Corp., Norwest Corp., or Wells Fargo & Co.
Deals with Norwest or First Chicago would have to be structured as mergers of equals. But combining Banc One's credit card operations with First Chicago's would provide economies of scale and create a Midwest powerhouse, while a merger with Norwest would create one of the best consumer-oriented retail banking operations in the country, the report said.
While the blockbuster acquisitions-BankAmerica with NationsBank or Banc One with First Bank-are provocative, the likely suitors are going to be the companies that are acquisition-ready and the likely targets are going to be those either struggling with revenue growth or facing insurmountable technology costs.
"The No. 1 issue is going to be top-line revenue growth," Mr. Plodwick said in an interview, "even though bank earnings growth has been robust over the last few years."
As for technology, companies that haven't bought into new systems are going to be hard-pressed to do so with so many potential suitors who have already made the investment. Technology costs were major drivers in decisions by Boatmen's Bancshares to sell to NationsBank and for U.S. Bancorp to agree to be bought by First Bank, the analyst noted.
Mr. Plodwick says NationsBank, First Union, and National City Corp. of Cleveland are the most likely to announce deals before the end of the year. All three have successfully integrated large acquisitions over the past couple of years.
NationsBank was the last to make a big acquisition, closing on Boatmen's in January, but Mr. Plodwick, like many other analysts, says that deal went so smoothly that the Charlotte company is likely to seek out another big deal soon.
Of the biggest U.S. banks, only three are not considered as takeover targets in the report: Chase Manhattan Corp., Citicorp, and NationsBank. For the sake of simplicity, no foreign-owned banks or savings and loan companies were factored in as buyers or sellers.
Despite the numerous projections, and statements of logic accompanying each combination, there are numerous caveats as well, and Mr. Plodwick details most of them in his report. While many blockbuster combinations are intriguing, they're also unlikely.
Among the smaller banks likely to acquire, Mr. Plodwick says Cincinnati's two biggest banks, Fifth Third Bancorp and Star Banc Corp., are ready to do deals and their stock valuations are among the best in the industry.
As for acquisitions of either, Mr. Plodwick notes several possible suitors, but said such deals would likely be too expensive. An acquisition of Star Banc by Fifth Third, however, would make "a great deal of strategic sense," he notes.
Geographically, Mr. Plodwick said focus on the "mids"-the Midwest, the Midsouth, and the Middle Atlantic states.
Pricing, technology, and revenue issues will be of major importance, he said. "Put these three things together and the stars line up."