BIRMINGHAM, Ala. -- AmSouth Bancorp plans to buy First American Corp. of Tennessee in a $5.3 billion stock deal, creating one of the largest banks in the Southeast.
The deal will create a bank with $40 billion in assets and 680 branches in nine Southeastern states, including the fast-growing markets of Tennessee and Florida.The acquisition was originally worth $6.3 billion, but investors pushed shares of AmSouth down nearly 14 percent Tuesday.
On the New York Stock Exchange, AmSouth shares closed down $3.93 3/4 at $24.43 3/4. First American stock was trading up $2.81 1/4, or 7 percent, to $43.62 1/2, also on the NYSE.
Despite the AmSouth decline, analysts said the acquisition had the potential to make the Birmingham-based bank a regional powerhouse.
"If they get the numbers they are looking for, I think they will be in a position to be one of the strongest financial institutions in the Southeast," said analyst Mike Granger of Fox-Pitt, Kelton Inc. "If they don't, they may be vulnerable to a takeover."
Directors of both companies unanimously approved the deal, which gives First American shareholders 1.871 shares of AmSouth common stock for each First American common share. The deal, which the banks expect to be completed by the end of the year, still faces shareholder and regulatory approval.
The headquarters will be in Birmingham, but AmSouth chief executive C. Dowd Ritter said the company will seek ways to keep "significant operations" in Nashville, Tenn., where First American is based.
AmSouth spokesman Jim Underwood said there would be "minimal" branch closings since the only cities where AmSouth and First American overlap are Nashville and Chattanooga, Tenn.
Both banks have about $20 billion in assets. But AmSouth, the third-largest bank in Alabama, currently has 290 offices, compared to 390 for First American, the No. 2 bank in Tennessee.
First American has struggled since last year, when it acquired Deposit Guaranty Corp. of Jackson, Miss.