First Interstate Bank, which has been fighting an unwelcome takeover bid from Wells Fargo & Co., said Monday it had agreed to be acquired by First Bank System of Minneapolis for a record $10.3 billion in stock.
The value of the latest deal is slightly higher than the $10.1 billion that Wells Fargo offered for its cross-California rival First Interstate on Oct. 18.If completed, the new deal would exceed the record $10 billion merger agreement between Chase Manhattan Corp. and Chemical Banking Corp. that would create the nation's biggest banking concern.
A First Interstate-First Bank System combination would create the nation's ninth-largest banking company, with $92.4 billion in assets and 1,514 branches in 21 states.
The deal is a return to the trend of friendly mergers in the banking industry. A wave of mergers has been spawned by a belief that only the biggest, most efficient banks can survive in increasingly intense competition among one another, as well as with industrial giants like AT&T Corp. and General Motors Corp., which now offer credit cards, and brokerage firms, which offer banklike services.
The combination would result in estimated annual savings of $500 million, or 22 percent of First Interstate's expenses, said John Grundhofer, the chairman of First Bank System.
Grundhofer, 56, would be chairman or the merged bank, which would retain the First Interstate name but would have headquarters in Minneapolis. William Siart, 48, chairman of Los Angeles-based First Interstate, would be president.
Since the Wells Fargo bid, First Interstate had been actively seeking a different partner and had reportedly been opened its books to Banc One of Ohio and Norwest Corp., another banking company based in Minnesota.
The deal with First Bank, which has been approved by the boards of both companies, requires approval of shareholders and regulators. The banks said they expect the deal to be completed next spring.
Under terms of the latest deal, First Bank System would exchange 2.6 of its common shares for each share of First Interstate.
That would value the deal at about $132.27 1/2 per First Interstate share, based on Friday's closing price of First Bank stock.
First Interstate, the nation's 14th largest bank, closed Friday at $127.75 a share, and No. 29 First Bank System closed at $50.87 1/2.