BankAmerica Corp. said yesterday that it had agreed to acquire Valley Capital Corp., a company based in Las Vegas that owns the Valley Bank, the second-largest bank in Nevada.
The purchase will be made with BankAmerica stock valued at about $380.5 million, with each share of Valley stock being exchanged for a share of BankAmerica. Valley Bank's name will be changed to BankAmerica, but Valley's top officers will manage the new bank. Valley Capital's $233 million subsidiary bank in Arizona will be combined with BankAmerica's existing bank in that state.
Valley's stock rose $5.50 on the New York Stock Exchange after the announcement was made yesterday, to close at $34, while BankAmerica's rose 62.5 cents, to $35.50.
Profits at Valley Capital increased rapidly in the late 1980s, but growth in earnings in recent quarters has slowed as losses on bad loans have increased. In the first half of the year, Valley Capital earned $12.1 million, down from $17.7 million a year earlier.
The company's holdings of badly troubled loans and real estate acquired through foreclosure totaled $53.8 million at the end of the second quarter, down from $64.1 million at the end of March, but up from $18.8 million a year earlier.
The purchase by BankAmerica, whose profits exceeded $1 billion in 1990 and 1989, is a reminder that more profitable banks with stock prices that are high relative to other banks have an advantage in making acquisitions.
In BankAmerica's case, its stock price is high enough that it could afford to issue new shares that are worth nearly twice Valley's net worth. Other banking companies, with weaker stock prices would have been reluctant to pay such a high price because it would have required them to issue so many shares that their existing shareholders would have been hurt.
VTC The acquisition is the last in a series for BankAmerica in the western United States. Since 1989, it has paid $447.2 million in cash to acquire savings institutions or their branches in Nevada, Oregon, Washington, Arizona, Texas and California with deposits the time of the acquisitions of nearly $15.8 billion.
Besides owning the largest banks in California and Washington state, BankAmerica is now a close rival to First Interstate, the largest bank in Nevada, and is one of the largest banks in Arizona, Oregon and New Mexico. It also has small subsidiaries in Idaho and Texas.
Terms of the purchase agreement call for BankAmerica to make a cash payment to Valley shareholders to the extent that the value of BankAmerica shares in the exchange would be worth less than $360 million.