First Union to acquire Chicago securities firm

Bank will purchase Everen Capital for $1.1 billion in stock

April 27, 1999|By BLOOMBERG NEWS

CHARLOTTE, N.C. -- First Union Corp., the sixth-largest U.S. bank, agreed yesterday to buy Chicago-based Everen Capital Corp. for $1.1 billion in stock, its second acquisition of a securities firm in a year.

Everen shareholders will get 0.555 First Union share for each of their shares. Everen shares yesterday rose $4.3125 to $28.4375; First Union fell $1.25 to $53.75.

First Union, based in Charlotte, said the acquisition will form the sixth-largest U.S. brokerage firm, with assets of $147 billion and 3 million customers.

The purchase, in addition to that of regional investment bank Wheat First Butcher Singer last year for $500 million, strengthens First Union's ability to serve corporate clients and adds a sales network for consumer financial products such as mutual funds.

"This gives them the Midwest exposure that they haven't had," said Daniel Eagan, a managing director at Blackrock Inc., a New York money manager. "It helps with the retail distribution."

Everen has offices in 28 states and more than 1,800 investment consultants. Its concentration in Illinois, California, Wisconsin, Texas and Colorado will complement First Union's mostly East Coast brokerage operations.

The combined companies will have 2,710 offices in 41 states with 6,259 investment representatives, displacing A. G. Edwards Inc. as the sixth-largest broker behind PaineWebber Inc.

While First Union has been cutting costs, including trimming its work force, it has spared its capital markets unit, where the bank has hired equity salespeople, traders and mergers and acquisitions advisers. The group now produces 20 percent of earnings and has grown through acquisitions, including a mergers and acquisitions advisory firm, Bowles Hollowell Conner & Co.

First Union, which has $223 billion of assets, said it will take a pretax merger-related charge of $55 million, or 4 cents a share, in the third or fourth quarter for buying Everen.

It expects the cost of the acquisition to cut earnings by 2 cents a share in 1999, and add 2 cents a share in 2000.

The bank plans to issue 19.4 million shares for the acquisition. That will not affect First Union's stock buyback program because the bank will purchase the same number of shares in the market over an unspecified period.

The bank expects to complete the acquisition, which must gain shareholder and regulatory approval, between July 1 and Sept. 30.

Pub Date: 4/27/99

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