NCNB to buy Sovran bank $4.2 billion deal to create 3rd largest bank in nation.

July 22, 1991|By Knight-Ridder

NCNB Corp. will buy C&S/Sovran Corp., forming the nation's third biggest bank, in a transaction valued at $4.2 billion.

The two banks plan to announce details of the buyout today in news conferences in New York in the morning and Charlotte, N.C., and Atlanta in the afternoon.

Bennett Brown, now chairman of C&S/Sovran, will become chairman of NCNB, which will be renamed NationsBank, sources say. Hugh McColl Jr., now NCNB chairman, will be chief executive and replace Brown, 62, who planned to retire from C&S/Sovran within the next year.

The headquarters of the combined bank, which would have $116 billion in assets, will be in Charlotte.

NationsBank would rank behind only Citicorp, with $217 billion in assets, and Chemical Banking Corp. and Manufacturers Hanover Corp., which announced plans to merge last Monday, with combined assets of $135 billion.

The boards of the two banks voted yesterday to approve the merger after "lengthy consideration," said a source familiar with the negotiations.

To buy the bank, NCNB will exchange its shares for those of C&S/Sovran's stockholders. When the talks between the two banks began in late June, McColl told Brown he would be willing to give 0.75 shares of NCNB for each share of C&S/Sovran.

But during the negotiations, NCNB agreed to give 0.84 shares for each C&S/Sovran share. Based on Friday's closing price of $37 for NCNB, the deal would be worth $31.08 a share, or $4.2 billion.

The board of NationsBank will consist of the present members of NCNB plus many members of the C&S/Sovran board, sources said.

Recently, McColl told a meeting with members of NCNB's trust and securities departments that this would be the bank's last big merger for the foreseeable future. In years to come, he said, the bank will concentrate on organizing its sprawling operation and improving earnings.

The buyout agreement is a stark contrast to NCNB's failed attempt to buy Citizens and Southern Corp., of Atlanta, in 1989. NCNB, led by McColl, attempted a hostile takeover, which was sharply rebuffed by Brown.

Five months later, in September 1989, C&S agreed to merge with Sovran Financial Corp., of Norfolk, Va., in what was widely perceived as a defensive move against NCNB. The deal was billed as a merger of equals and the new bank, C&S/Sovran, had dual headquarters in Atlanta and Norfolk.

But C&S/Sovran ran into major loan problems in Washington's faltering real estate market. The company's stock plummeted, making it vulnerable to a revisit by NCNB, which this time made pains to be friendly.

The merger creates a bank with nearly 2,000 offices, stretching from Baltimore to Miami to El Paso, Texas, and signals a shift in banking power. Many of the nation's traditional banking powers are struggling from bad loans made to Third World countries, real estate and corporate leveraged buyouts. Meanwhile, regional banks are thriving, including NCNB; Charlotte's First Union Corp.; Banc One Corp., Columbus, Ohio; NBD Corp. of Detroit; and Fleet/Norstar Financial Group. Inc., of Providence, R.I.

NCNB's name change reflects its geographic reach beyond its North Carolina base. The name comes from a Delaware credit-card operation that NCNB owns.

However, McColl has said that neither he nor NCNB's directors like the name. But dropping NCNB may have advantages: The name is widely used by competitors to emphasize that NCNB is an out-of-state bank, particularly in Texas.

While Charlotte comes out a winner, Atlanta will apparently retain substantial banking operations. However, Norfolk's role in the new bank may be diminished.

Terry Orell, the Charlotte Chamber's chief industry recruiter, was ecstatic that the combined bank apparently will keep its headquarters in Charlotte.

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