Carl Reichardt Flexes His Multiple

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Carl Reichardt Flexes His Multiple

There are three sure things in life: death, taxes, and the fact that Carl Reichardt, chairman of Wells Fargo, soon will be acquiring another bank (or banks or savings and loans and banks). The reason is that Mr. Reichardt now has the requisite currency with which to deal --a refurbished stock sporting a price-earnings multiple of around ten.

So he is on the prowl for new properties even before, it is said, he has completely digested his last acquisition, the Crocker Bank. And if the Wells CEO can do with forthcoming acquisitions anything like what he seems to be doing with Crocker, the market may further bump up his stock multiple, creating the preconditions for additional aggrandizement.

What prizes does Mr. Reichardt covet? If he had his druthers, he would go to Los Angeles, where he has only limited strength, even with Crocker, and to San Diego, where he has even less. And given half a chance, he would bid for Union Bank.

Nearly everyone who is anyone at Wells Fargo originally came from Union--Reichardt himself, president Paul Hazen, real estate boss Dave Petrone, chief commercial lender Jack Grundhofer, and many more. Indeed, Wells Fargo can be styled as a Union Bank with a consumer orientation.

And although the Reichardt regime has benefited enormously from Wells' awesome consumer muscle, it cannot be said that Mr. Reichardt has ever been entirely comfortable being CEO of a primarily consumer bank. He is a construction lender par excellence, and he is greatly enamored of the lending culture of Union, which is strong in both construction and middle-market commercial and industrial loans. Both Mr. Reichardt and associate Paul Hazen describe Union as a "very valuable property.'

If Union were unavailable, Reichardt might content himself with buying a passel of Bank of America's southern branches. Or he might find himself the fortuitious beneficiary of someone else's Bank of America deal.

Candy for Everyone

Say that Joe Pinola of First Interstate pursues his dream of returning to Bank of America as its next CEO. Where would the irascible Mr. Pinola get the capital with which to buy B of A? Well, quite simply, by selling First Interstate of California, his flagship, which he couldn't keep in any case. Then he could perhaps acquire B of A and link it to the out-of-California part of the First Interstate system.

Since that combination would necessitate the sale of certain banks for antitrust reasons--say, at least one bank in Washington--Mr. Pinola would probably acquire enough additional capital to dispose of the bulk of Bank of America's more troublesome remaining nonperformers.

Upshot: The Bank of America problem is solved; Pinola realizes his dream; and Carl Reichardt acquires at least the southern segment of First Interstate of California. (Certainly, the Justice Department would never let it go to Security Pacific, which is already big in the south but might, however, get its hooks into some of FiCal's northern branches. Security seems to be looking north. It even has particular designs on the Rainier Bank in Washington.)

If Mr. Reichardt were precluded from going to southern California, he would redirect his energies either to Arizona or Texas. A native Texan, Reichardt is bullish on long-term possibilities in his home state.

He says: "We may soon be able to go to Texas, bringing our California experience and low-cost retail systems into an area where local institutions have never had the opportunity to learn how to run a branch network. We would add value and achieve substantial economies of scale.'

Dismantling Crocker

Certainly that would be the case. But the value added from any interstate acquisition or, for that matter, from most other intrastate combinations is not likely to compare with that added in the Crocker deal. That's because Crocker was not so much an acquisition as a dismantlement. …