Merger mania struck the banking industry again Thursday as Minneapolis-based First Bank System agreed to acquire U.S. Bancorp for $9 billion.
U.S. Bancorp, which operates as U.S. Bank, has 28 branches in Utah, which were acquired in December 1995 when the bank holding company, based in Portland, Ore., took over Boise-based West One Bank.West One had entered the Utah market in 1985 by acquiring two old-line Utah banks, Continental Bank & Trust and Tracy-Collins Bank and Trust.
U.S. Bancorp spokeswoman Karen Tolvstad said some 4,000 jobs will be cut as a result of the merger. A "significant" number of the cuts are expected to be made in Portland, where U.S. Bancorp's headquarters duplicates many of the same positions at First Bank in Minneapolis, she said.
U.S. Bank employs some 275 people in Utah. The impact on those jobs has not been determined, Tolvstad said.
"Jobs will be lost from both banks, but those decisions are still being made."
Surprisingly, considering that First Bank is the acquiring entity, the new company that will emerge from the acquisition will be based in Minneapolis but take the U.S. Bank name, not First Bank.
This will be good news for the local U.S. Bank branches, which only last year completed their name changeover, including signs, stationery and everything else that carries the company logo, from West One to U.S. Bank.
The decision is also a good one for First Security Bank of Utah, which won't have to worry about confusion stemming from having two large banks in Utah whose names both begin with "First."
"The decision was made that the U.S. Bank name had value," Tolvstad said.
Lawrence W. Alder, president of the Utah Bankers Association, said the takeover had been rumored for some time.
"U.S. Bank has been considered a prime takeover target for a mega-regional like First Bank, so I'm not really surprised," Alder told the Deseret News. "But I am a little surprised that they say they will keep the U.S. Bank name. It will be interesting to see if they stick with that decision."
Alder said the merger is a good one for First Bank. "They are an aggressive bank, and this opens up a substantial part of the West and Northwest for them."
He said he expects that First Bank will make the merger "as least disruptive as possible."
Tolvstad said the merger is a "no lose" situation for current and future U.S. Bank customers in Utah. "This is really good for them," she said in an interview.
"In the short term, nothing will change; it's business as usual. In the long term, there will be added benefits for our Utah customers that will come out of this partnership."
She said First Bank is "more technically advanced" than U.S. Bank. "First Bank has already invested in technical initiatives, such as their interstate banking programs that allow them to have more consistent operations throughout the system and bring in new products and services more quickly."
The two companies expect the merger to reduce their combined costs by 14 percent.
The new U.S. Bancorp will be the nation's eighth largest based on market capitalization, and the 14th largest based on assets of $70 billion. It will serve nearly 4 million households and 475,000 businesses in 17 states.
Under the agreement, U.S. Bancorp shareholders will receive a tax-free exchange of 0.755 shares of First Bank stock for each share of U.S. Bancorp. Based on U.S. Bancorp's closing price Wednesday, the exchange ratio represents a price of $59.08 per share, a 22 percent premium over its closing price of $48.25.
The Associated Press reported Thursday that U.S. Bancorp faced increasing pressure to find a friendly merger partner because rivals, including Seattle-based Washington Mutual, which also has operations in Utah, were growing larger and could offer services at lower cost.
The deal is subject to the usual regulatory approvals but is expected to close by fall.
John F. Grundhofer, chairman, president and chief executive officer of First Bank, will be president and CEO of the new company, and U.S. Bancorp chairman and CEO Gerry B. Cameron will serve as chairman until he retires next year.
U.S. Bancorp has $33.3 billion in assets and 636 branches in six Western states. First Bank System has $36.5 billion in assets with 374 offices in 11 Midwestern states.