Magazine article American Banker

CoreStates Rejects $17B Takeover Bid from Mellon

Magazine article American Banker

CoreStates Rejects $17B Takeover Bid from Mellon

Article excerpt

CoreStates Financial Corp. has rejected a takeover bid from Mellon Bank Corp., Mellon said Thursday.

"We made an offer to CoreStates which in our opinion was attractive to both sides and it was rejected," said Mellon spokesman Steve Dishart. "We withdrew it at CoreStates' request."

The offer, said sources who claim knowledge of the situation, was for more than $17 billion, or $85 to $87 a share. It reinforced Wall Street sentiment that CoreStates must either sell out or find a way to quickly revive its underperforming stock.

As it did in 1995 when BankBoston Corp. came calling in a similar way, CoreStates responded by saying it intends to remain independent.

"After full discussion, our board of directors unanimously rejected the (Mellon) offer and reiterated its expectation that the company can create the greatest long-term value for shareholders by pursuing a course of independence," the Philadelphia banking company said in a statement.

Despite CoreStates' stand, investors and analysts liked the idea of combining Pennsylvania's two biggest banks.

"It would be a nice, complementary fit," said analyst Anthony R. Davis of SBC Warburg Dillon Read. "I can't argue with it at all."

The deal, if it ever happened, would likely bring the biggest price ever for a U.S. bank.

CoreStates' market valuation is $14.8 billion-bolstered lately by takeover speculation-and is a shade higher than Pittsburgh-based Mellon's $14.2 billion. However, Mellon's 19.6 price-earnings multiple is higher than CoreStates' 18.5.

The companies have a significant consumer banking overlap in the Philadelphia area that could yield a big payoff through branch closings. Divestitures might also be required to comply with antitrust guidelines.

Mellon and CoreStates have different wholesale and operating strengths. Mellon has stressed asset management, CoreStates item processing. …

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