Magazine article American Banker

Merger Deals Piling Up in Hot St. Louis Market

Magazine article American Banker

Merger Deals Piling Up in Hot St. Louis Market

Article excerpt

In its second deal in as many months, Marshall & Ilsley Corp. of Milwaukee has agreed to buy Trustcorp Financial Inc. of St. Louis for roughly $181 million in a cash-and-stock transaction.

The acquisition will expand M&I's branch network in the St. Louis area as it simultaneously works to close another $700 million cash-and-stock deal it reached last month with Gold Banc Corp. of Leawood, Kan.

M&I will fold Trustcorp's Missouri State Bank and Trust, which has $711 million of assets and seven branches, into its own Southwest Bank, which has eight branches in Missouri and one in Illinois. The deal is expected to close in the second quarter, after regulatory approvals and a shareholder vote.

The price -- at 3.6 times book -- raised analysts' eyebrows, but M&I forecast the deal would cost 1 cent per share of 2006 earnings.

"I don't quibble with the fact they're building a good company, but I don't see how people can make money on the stock," said Punk, Ziegel & Co. analyst Richard Bove, adding that M&I will have to issue more stock under the terms of both of its pending acquisition deals.

He reiterated his "market perform" rating after the M&I-Trustcorp deal was announced.

Anthony R. Davis, an analyst for BankAtlantic Bancorp Inc.'s Ryan Beck & Co. Inc., wrote that "M&I is paying a full price for Trustcorp, but it can afford to, given the small size of the transaction." Ryan Beck has an "outperform" rating on M&I's stock.

M&I's Southwest Bank is No. 6 in deposit market share in the St. Louis market, according to Federal Deposit Insurance Corp. data. After the merger it would leapfrog First Banks Inc. of Hazelwood, Mo., for fifth place.

"We're not reacting to pressure when we do a deal," said M&I's chief financial officer, John Presley, in an interview.

Within an hour of M&I's announcement a competitor, National City Corp. …

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