N.C. bank moves to buy MNC $1.36 billion merger to end independence for biggest Md. bank

February 19, 1993|By David Conn | David Conn,Staff Writer

Maryland's largest bank received the news yesterday that it has been expecting for more than half a year as NationsBank Corp. of Charlotte, N.C., announced it would exercise its option to buy MNC Financial Inc.

The acquisition, expected to be finished by September, means the end of independence for Baltimore's oldest and largest banking company. MNC, which owns Maryland National Bank and American Security Bank, was among the state's most powerful business and philanthropic institutions in its mid-1980s prime.

But an ill-conceived campaign of rapid growth, fueled by commercial real estate lending, led to enormous losses in 1990 and 1991. MNC was forced to lay off thousands, curtail its commercial lending activity and cut off the flow of funds to Maryland's cultural fixtures and charities. The losses ultimately led to MNC's leaders putting the institution into the hands of an out-of-state company.

NationsBank, the nation's fourth-largest banking company, said yesterday that it will pay MNC stockholders $15.17 a share, or $1.36 billion, in a combination of cash and stock that has yet to be determined.

In September, the company paid $200 million for 16 percent of MNC's common stock as part of a deal that was first proposed last July. That agreement -- intended to stabilize MNC's fragile financial condition -- also gave NationsBank an option to acquire the rest of MNC any time before September 1995, with a price that would increase with each year the deal was delayed.

As MNC's earnings improved dramatically in the past six months, and its large portfolio of problem assets diminished, NationsBank officials began to indicate publicly they were likely to exercise their option soon.

The rumors heated up several weeks ago when MNC restructured its consumer and corporate banking operations in a way that mirrored the structure of NationsBank.

"The acquisition of MNC is of enormous strategic importance for us," NationsBank Chairman Hugh L. McColl Jr. said in a statement. "This will give NationsBank the premier franchise in the vital and growing market of Maryland, Virginia and the District of Columbia."

The merger is contingent on the approval of MNC's stockholders, who will vote on the proposal at their May 20 stockholders meeting.

The Federal Reserve Board and the U.S. Department of Justice also must clear the acquisition. MNC officials pointed out that federal regulators were familiar with the plan, having studied it last summer before deciding it didn't give NationsBank premature control over MNC. Officials from both companies suggested the deal will be completed in the third quarter.

The regulators have "already seen the agreement when they approved the option, so there's nothing here that's going to surprise them," said MNC Chairman Alfred Lerner. "It may go a little faster than normal."

The news of the acquisition came from NationsBank officials early yesterday afternoon, several hours after MNC asked the New York Stock Exchange to halt trading in its stock. After trading resumed, about 3 p.m., MNC's shares rose to $14.25, up fTC $1.325 from Wednesday. More than 1.4 million shares changed hands yesterday, about six times the average daily volume.

The trading suspension also was due to a restatement of MNC's latest quarterly and annual earnings.

Because of an accounting change concerning tax credits, MNC added $60 million to its $43.1 million 1992 profit, for a new total of $103.1 million, or 62 cents a share. Mr. Bramble said the restatement, which added about 83 cents a share to the acquisition price, was planned even before the original agreement was announced last July, and had nothing to do with the formal notice NationsBank sent to Mr. Lerner yesterday morning.

Mr. Lerner, the company's largest shareholder, is a Cleveland businessman who helped save MNC from a federal takeover after most of its commercial real estate loans went sour in 1989. He stands to gain at least $111 million from the sale of his 7.35 million shares. He also owns options convertible into almost 1.4 million shares, though he said he wasn't clear on exactly what they would be worth under the terms of the merger.

Mr. Lerner said he will give up his chairmanship of the company when the deal is completed. He'll remain chairman of MBNA Corp., the Delaware-based credit card company that MNC sold to the public in 1991. The merger would end Mr. Lerner's business attachments to Maryland, except for his ownership of the area's Town & Country apartment properties.

Neither company had any details about whether the merger would result in branch consolidations or job losses. MNC, a company with $17 billion in assets, has about 7,800 employees at its Baltimore headquarters and 240 branches.

NationsBank has $118 billion in assets and more than 1,700 branches in nine states. The company operates 83 branches in Maryland, and employs about 3,500 people in its "Metro Bank," which includes Maryland, Washington and Northern Virginia.

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