Banks Announce $700 Million Merger Plan
PITTSBURGH (AP) _ PNC Financial Corp. of Pittsburgh and Citizens Fidelity Corp. of Louisville said Monday they agreed to merge in a stock swap valued at an estimated $700 million, the first bank combination announced since Gov. Dick Thornburgh signed interstate banking legislation last week.
A definitive merger agreement, which much be approved by shareholders and bank regulators, would create the nation’s 18th-largest bank holding company, with assets of $22.8 billion.
The merger would create the second largest banking company in Pennsylvania behind Mellon Bank Corp., which has $33.4 billion in assets.
Citizens Fidelity is ″well-managed, high performance company whose financial results have been excellent,″ said PNC Chairman Thomas H. O’Brien.
The merger agreement calls for Citizens Fidelity’s 18,600 outstanding shares of common stock to be exchanged for 0.77 share of PNC common. The Kentucky bank said it also gave PNC an option to purchase unissued shares of its common stock at $31.62 1/2 .
PNC reported 1985 net income of $53 million and Citizens Fidelity posted an $11 million profit.
″Citizens Fidelity has strong market positions in several businesses which will offer attractive economies of scope to our existing operations,″ O’Brien said. ″PNC Financial, similarly, will be able to offer a number of new products and services to customers of Citizens Fidelity.″
Prior to enactment of the new Pennsylvania interstate banking law, proposed mergers had been announced between Continental Bancorp Inc. of Philadelphia and Midlantic Banks of New Jersey, and between Corestates Financial Corp. of Philadelphia and New Jersey National Corp.
The PNC-Citizens Fidelity merger was the first announced since the law was signed last Wednesday, said state banking department spokeswoman Sandy Dunkelberger.
Under the measure, bank holding companies in seven other states and the District of Columbia may enter Pennsylvania by acquiring a bank or bank holding company or chartering a new bank. The new law takes effect in August.
In addition to Washington, D.C. and Kentucky, the measure included New Jersey, Delaware, Maryland, Ohio, Virginia and West Virginia.
Citizens Fidelity would retain its name, management and headquarters in Louisville while operating as a group within PNC. J. David Grissom would remain chairman and chief executive of the Kentucky bank while becoming vice chairman, director and member of a new four-person management committee at PNC.
Besides Grissom, three directors of Citizens Fidelity would be appointed to PNC’s board.
″The association with PNC will substantially accelerate and enhance the economic development of the entire region that is served by Citizens Fidelity, including the creation of additional jobs in the Louisville area,″ Grissom said.
PNC had total assets of $18.9 billion and Citizens Fidelity had assets of $4 billion as of March 31.
The combined company, based on 1985 results, would rank second among U.S. bank holding companies with a 17.62 percent return on average total equity and would rank first with 1.14 percent return on average assets, the partners said.