Tennessee: Hunting Season to Open This Summer for Mergers and Acquisitions as State Prepares Regional Banking Law
MEMPHIS -- By July 1, Tennessee banks should be able to hunt for acquisitions or merger partners in at least six other southeastern states, while banks in those states look for similar game in Tennessee.
But the arrival of regional, reciprocal interstate banking may mean Tennessee banks will try to acquire and merge within the state before moving across the borders, according to banking industry experts.
Meanwhile, all of the largest bank holding companies in Tennessee will be potential targets for out-of-state buyers. All but one -- Union Planters Corp. in Memphis -- will be potential acquirers, say those experts.
Analysts also see little chance that medium-siezed and small community banks will be swallowed up by out-of-state banking giants.
Experts think that most of the buying wit hin the state will involve big banks absorbing smaller ones. But speculation abounds on two possible major marriages -- Third National Corp. in Nashville with National Commerce Bancorp. in Memphis, and First Tennessee National Corp. in Memphis with Commerce Union Corp. in Nashville. Officials of those bank holding companies say no deals are in the works.
First, the Tennessee House and Senate must iron out minor differences in bills to allow banks in 13 states to buy banks in Tennessee if Tennessee banks can do the same in those states. Gov. Lamar Alexander is expected to sign the resulting bill.
So far, Kentucky, Virginia, North Carolina, South Carolina, Georgia, and Florida have adopted similar laws. The other seven states covered in the Tennessee bill have not. They are Missouri, Mississippi, Arkansas, Alabama, Louisiana, Indiana, and West Virginia.
More In-State Deals
Some recent mergers and acquisitions have been inspired, in part, by the approach of interstate banking -- for example, the purchase by First American Corp., Nashville, of the $350 million-asset Midland Bank & Trust Co., Memphis.
John Ray, bank analyst with Morgan, Keegan & Co., a Memphis-based investment firm, expects more deals within Tennessee before the interstate compact becomes law.
"There's not that much of significant size -- over $100 million [in assets] -- left to acquire," he said in a telephone interview. Mr. Ray does not see small banks as near-term acquisition targets.
E. Glenn "Buck" Jones, bank analyst for J.C. Bradford & Co., a Nashville-based investment company, thinks acquisitions will be confined to selected markets such as the rural, southeastern rim of the state.
W.C. "Billy" Adams, state commissioner of financial institutions, said he suspects there are merger or acquisition negotiations going on, but doubts he will learn about them until deals are made.
Mr. Adams predicted that "mostly the larger holding company banks" will be active. He explained: "They would want to try to get in the markets they want to be in that they are not in, before they get into interstate banking."
Experts see several reasons why the larger companies may try to make their moves before the interstate market is open.
"Larger banks will be looking for acquisitions as takeover protection," said Robert Sellers, head of Banking Consultants of America in Memphis.
Big bank holding companies "are seeking to increase their asset and market capitalization sizes" in order to make any bid to acquire them as high as possible, Mr. Ray added.
Not only may that make the companies harder to acquire, but it could make banks more attractive takeover targets, he said. That is, some of the larger banks may want to grow within the state for a couple of years, then sell out, he said. The growth in size and number of markets may give them the ability to pick the time they want to sell and raise the price shareholders will get, he added.
Cliff Davis, president of Cliff Davis & Associates in Memphis, whose management and planning consultant firm works with financial institutions, said bank chief executive officers tell him a banking company will need at least $5 billion in assets to survive in an era of interstate banking. …