Magazine article American Banker

First Union Seen Likely to Acquire Dominion

Magazine article American Banker

First Union Seen Likely to Acquire Dominion

Article excerpt

FIRST Union Corp. is negotiating to acquire Dominion Bankshares Corp., parent of Virginia's third-largest bank, according to sources.

First Union, based in Charlotte, N.C., issued a statement on Thursday sying it is in merger discussions with an unidentified partner. So did Roanoke-based Dominion.

Wall Street latched on to the likelihood of a merger, driving up Dominion's share price by $2.25 to $16.875 late Thusday.

Earnings Estimation

Analysts speculated that First Union would do a stock swap valued at about $16 to $20 a 4 share, or $618 million to $774 million, to acquire Dominion. That woukd represent a premium of 1.2 to 1.5 times the book value of the $9.4 billion-asset banking company.

First Union also announced Thursday that it expected to earn $139 million, or $1.05 a share, in the third quarter, more than double the earnings of the year-earlier quarter. The anticipated profit was significantly ahead of analysts' consensus estimate of 89 cents a share.

First Union's stock price was $38.25 late Thursday, up $1.25.

Power to Acquire

First Union's increased earings power is giving the $48 billion-asset compaany more opportunity to expand. Since June, First Union has struck deals to acquire two thrifts in South Carolina and Georgia, which will contribute $3.6 billion in additional assets.

Dominion would give First Union an entry to Virginia and expand its minor presence in Tennessee. Dominion owns a $2.1 billion-asset bank in Tennessee, where First Union owns a $147 million-asset bank.

The major disadvantage is asset quality. Dominion is the weakest of Virginia's three major independent banks. Like the others, it got caught up in speculative real estate lending in the metropolitan Washington area, but has been slower to recover.

Dominion's nonperforming assets ratio fell to 6. …

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