Regions Financial Corp. said Friday it would merge with Union Planters Corp. in a multibillion-dollar stock deal, creating one of the largest banks in the fast-growing Southeast.
The combined bank, to be known as Regions Financial Corp., would have $81 billion of assets and $56 billion of deposits.
It would also have a greater branch presence than regional rivals SunTrust Banks Inc. and BB&T Corp., with roughly 1,400 banking offices in 15 states. Regions is based in Birmingham, Alabama, and Union Planters in Memphis, Tennessee.
People familiar with the matter had expected the deal to be structured as an acquisition of Union Planters, with a value of about $6 billion and a small premium for Union Planters shareholders. The announced deal carries no premium.
“This deal looks like a merger of equals, based on who brings what to the table,” said Jeff Davis, an analyst for FTN Midwest Research in Nashville, with a “neutral” rating on both companies’ shares. “Could Union Planters have gotten a higher premium? Maybe, but the merger allows them to grow, and cut expenses, a little bit faster than on its own.”
Based on Thursday’s closing prices, Regions’ shareholders would get roughly a 59 percent stake in the combined company, and Union Planters’ shareholders the remaining stake.
Regions was not immediately available for comment. Union Planters declined to comment.
Analysts expected an increase in bank mergers after J.P. Morgan Chase & Co. agreed to buy Bank One Corp. for $58 billion, and Bank of America Corp. agreed to buy FleetBoston Financial Corp. for $47 billion.
Regions shares rose 5 cents to $37.80 in pre-market trading, while Union Planters shares rose 23 cents to $31.59. Regions has a market capitalization of $8.4 billion, and Union Planters $5.9 billion, based on reported shares outstanding.
Under the merger’s terms, Union Planters shareholders will receive one share of new stock in the combined company for each of their shares, while Regions shareholders will receive 1.2346 new shares for each of their shares.
The banks would have an equal number of board seats. Carl Jones, Regions’ 63-year-old chairman and chief executive officer, would be succeeded upon retirement in June 2005 as CEO and in June 2006 as chairman by Jackson Moore, 55, Union Planters’ chairman and CEO. Moore would be president for now.
“Union Planters management did a great job cleaning the company up (after acquisitions by prior management), but they pushed it as far as they could,” said Davis. “Regions has a very complementary franchise, but is better positioned to produce high returns on equity. The geographies fit together very well without a lot of overlap in the southeast.”
The merger is expected to increase the combined company’s profit by 2005. The banks expect $200 million of annual pre-tax cost savings, and $300 million of pre-tax restructuring costs. The merger is expected to close in mid-2004, subject to shareholder and regulatory approval.
Union Planters last week said fourth-quarter profit fell because fewer customers were taking out mortgages.
As of Dec. 31, Regions had $48.6 billion of assets and more than 680 banking offices. Union Planters had $31.9 billion of assets and 717 banking offices.
UBS Investment Bank and Sullivan & Cromwell LLP advised Regions. Morgan Stanley and Wachtell, Lipton, Rosen & Katz represented Union Planters.