Under the agreement, BankAmerica will pay dollars 939m in cash and 21.25 million of its common shares for Continental. It will also buy back about dollars 500m worth of its own shares in a move, it says, intended to ensure the transaction will not dilute existing BankAmerica shareholdings in the first year of the merger.
The takeover is the latest example of the rationalisation of the US banking industry. Some deals have involved banks in the same region merging to end duplication and cut operating costs. This was the case with Chemical Bank and Manufacturers Hanover in the New York area, as well as BankAmerica's own takeover of Security Pacific in 1992 to create a dominant bank on the West Coast.
The latest deal falls into a second category, involving the combination of two banks with little overlap in customer base.
The primary aim for BankAmerica is to strengthen its presence in wholesale banking in the US since, in addition to a strong position in the Chicago area, Continental also has a nationwide presence in corporate lending, particularly to privately-held companies.
BankAmerica ranks behind Citicorp as the second-largest bank in the US, with assets of dollars 187bn at its 1993 year-end, and 96,400 employees. Continental has assets of dollars 24bn and employs 4,200.
After the acquisition the old Continental unit will be called Bank of America Illinois.Reuse content