Wells Fargo's $246M Deal in Houston Seen Furthering Drive for Texas Clout

By Domis, Olaf De Senerpont | American Banker, July 30, 1999 | Go to article overview

Wells Fargo's $246M Deal in Houston Seen Furthering Drive for Texas Clout


Domis, Olaf De Senerpont, American Banker


SAN FRANCISCO -

Wells Fargo & Co. continued its quest to bulk up in Texas by announcing plans to buy $1.2 billion-asset Prime Bancshares of Houston for $246 million of stock.

The deal, unveiled late Wednesday, would bring Wells Fargo 24 offices and $981 million of deposits in and around Houston, strengthening its position as the fourth-largest banking company in Texas. Wells now has 388 Texas branches with a combined $15 billion of deposits, an 8% market share.

Wells Fargo, which already has 84 Houston branches, sees big promise in the fourth-largest U.S. city, said Paul "Chip" Carlisle, the banking company's regional president for Houston. The deal for Prime Bancshares "really fills some major holes we had here."

The deal price was slightly low, equaling 16 times Prime's estimated earnings for 1999, or 2.7 times book value. Most banks have been selling for 18 to 20 times earnings.

Analysts said the deal fits precisely with the acquisition strategy of $202 billion-asset Wells Fargo, which was formed in November when Norwest Corp. bought the old Wells and took its name..

"They've done a brilliant job in Texas, cobbling together a whole lot of smaller players," said R. Jay Tejera, an analyst at Ragen MacKenzie Inc. in Seattle. "They are continually assembling market share and market power."

Wells Fargo's Texas acquisition tear is largely the legacy of the former Norwest. The banking company, which was based in Minneapolis, started buying community banks in the Lone Star State in 1994; since then it has closed 31 small deals there. Roughly a dozen of these purchases were of banks with operations on the outskirts of Houston, Mr. Carlisle said.

The former Wells Fargo, meanwhile, entered Texas in 1996 with its acquisition of First Interstate Bancorp. The deal brought the San Francisco-based company $3 billion of assets in the Houston area, where First Interstate's Texas operations had been headquartered.

"The former Wells had not been aggressive in acquisitions here, but Norwest has built up an incredible franchise throughout Texas," said Mr. …

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