Magazine article American Banker

Society Corp. Deposit Sale Clears Way for Merger

Magazine article American Banker

Society Corp. Deposit Sale Clears Way for Merger

Article excerpt

Society Corp. said Friday that it agreed to sell $1 billion of deposits in the Cleveland area to overcome U.S. Justice Department objections to its pending merger with Ameritrust Corp.

With the sale, to a subsidiary of Star Banc Corp. of Cincinnati, the $1.2 billion Society-Ameritrust merger cleared its last regulatory hurdle, Society officials announced. The merger will be consummated today, they said.

The Justice Department's antitrust division, which has recently stepped up its scrutiny of mergers by banks serving the same markets, had contended that a combination of Society and Ameritrust would seriously reduce competition in the Cleveland area, where both are based. The department focused its antitrust concerns on commercial lending, particularly to small and midsize businesses.

Indefinite Delay Averted

The Federal Reserve Board approved the Society-Ameritrust deal on Feb. 13 by a 6-to-1 vote, but the merger could have been delayed indefinitely, perhaps by a court battle, if the Justice Department concerns were not allayed.

As the department asked, Society sold the $1 billion in deposits - currently in 28 Ameritrust branches - to a bank with a limited presence around Cleveland. Also going to Star Bank in the transaction are the branches and $400 million in Society and Ameritrust loans, including $40 million in small-business loans that the Justice Department wanted sold.

Star agreed to pay Society 2.19% of the deposits plus the value of tangible assets. Society said it would book a $20 million pretax gain, probably in the second quarter, and Star said the deal will improve its earnings per share.

Role of White Knight

With the Ameritrust merger, Society Corp. will increase its assets by about $10 billion, to $25.5 billion, and will rank just below the top 25 bank holding companies. Its deposit total will be $19 billion, up from $11.5 billion at yearend.

Society came to Ameritrust's rescue last fall with a merger plan after National City Corp., also of Cleveland, had made an unwelcome bid for the ailing company.

Legal observers said that either of the marriages would have provoked a Justice Department antitrust examination, because Cleveland was already one of the most concentrated urban markets in the country.

The Justice Department told Society that it must sell 26 branches in Cuyahoga County, which includes Cleveland, and two in Lake County to a single, independent financial institution.

Society, the third-largest Ohio banking company, was barred by the Justice Department from selling to any of its three largest competitors: Banc One Corp., National City Corp., or Huntington Bancshares Inc.

When Society and Ameritrust offered to sell off $850 million in deposits, the Justice Department demanded more.

The $1 billion deposit selloff gives Star Banc Corp., a $6.6 billion-asset company and a consistent profit maker, "a unique opportunity to establish a broad, strong network in the greater Cleveland area," said Oliver W. …

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