NationsBank seals deal today to be Md.'s top bank firm


October 01, 1993|By David Conn | David Conn,Staff Writer

The end of MNC Financial Inc. arrives today with barely a whimper as NationsBank Corp. of Charlotte, N.C., completes its $1.38 billion acquisition and becomes the biggest banking company in Maryland.

But for many MNC stockholders, the takeover's impact won't hit home until Oct. 15. That's when about half of MNC's shareholders will be paid off in the stock of NationsBank, America's fifth-largest banking company and arguably the most aggressive.

In a remarkable run of acquisitions, NationsBank has grown to be among the top three banks in nearly all the nine states in which it operates, in addition to the District of Columbia. By adding MNC's $17 billion in assets, NationsBank will grow to $124 billion.

Some analysts doubt the company can continue that run, though most recommend its stock.

"I had MNC [stock] in an IRA account, and I elected to receive NationsBank stock," said Nancy A. Bush, a banking analyst with Brown Bros. Harriman & Co. in New York. "They have an entrepreneurial spirit that you don't see at many banking companies. I think they will bring a whole new level of competition to the Baltimore market."

Baltimore-area consumers are likely to see little change this year. MNC's main subsidiaries, Maryland National Bank and American Security Bank in Washington, will retain their current prices and policies until late next year, when they will be replaced by the red and blue of NationsBank. And although NationsBank has said it will close some branches, the impact probably will be felt more in the Washington area.

But MNC shareholders -- 15,000 of whom lived in Maryland as of February, when the terms of the merger were announced -- face a choice about what to do with their money. NationsBank has decided to pay just under half the purchase price in cash and the rest in its own stock.

This week, it announced that MNC shareholders will receive either $15.17 a share in cash, or nearly three-tenths of a NationsBank share for each share of MNC, which closed up 12.5 cents yesterday, to $15. NationsBank's stock finished at $51.50, up 87.5 cents.

Letters were mailed last week to MNC's shareholders, asking them to choose either cash or stock. They have until Oct. 8 to make that choice, and the exchange will take place Oct. 15, according to NationsBank. Those who fail to respond will be paid whatever form allows NationsBank to meet its stock/cash exchange ratio.

Shareholders who bought MNC in 1990 when it was at its $2-a-share nadir may not like the idea of receiving cash, which would be taxable. And those who held 100 shares of MNC, worth $44 a share when it was formed as a bank-holding company in 1969, would now own 800 shares worth $12,136.

According to the merger agreement, however, only MNC's outgoing chairman, Alfred Lerner, and one institutional shareholder were assured of receiving a tax-free exchange of stock. NationsBank has said it doesn't expect any shareholders who send in an election choice to be stuck with cash if they don't want it.

For those who receive stock, the main decision will be whether to keep their new stake in NationsBank. The company's stock is rated a "buy" by most brokerages. Almost no opinions are lower than a "neutral," which usually means that you shouldn't buy at current prices but shouldn't sell existing holdings.

"If I were an MNC holder I would definitely want to hold on to the stock," said David West, an analyst at Richmond, Va.-based Davenport & Co. Mr. West and others agree with NationsBank's assessment that the acquisition of MNC, which continues to improve since its near-collapse in 1990, should boost profits.

NationsBank is still squeezing cost savings from its 1991 purchase of Atlanta-based C&S/Sovran Corp. and has been accelerating its investment in much-needed operating systems, Mr. West said. "They've been playing catch-up on that."

A key element of the drive toward more efficiency is the company's Model Banking Center Program, run by its executive vice president and merger chief, Harris "Rusty" Rainey. This project, developing standard products, services and systems nationwide, "has produced good early results and is expected to be expanded nationwide next year," Chapman Co. analyst John J. Rezai said in a July report on NationsBank.

Because NationsBank has become involved in practically every large corporate financing deal, the risks associated with owning its stock have become the risks of a general economic slowdown, Mr. West of Davenport argued. Also, "if they stub their toe [on an acquisition that hurts earnings], the stock market may not like that."

So far, Wall Street has cheered most of NationsBank's deals, the latest of which were aimed at nonbanking activities. Last year, it set up an investment company, NationsSecurities, with the brokerage Dean Witter; this year it bought $6 billion in loan receivables from Chrysler First and US West Inc., two consumer finance companies.

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