PORTLAND, Ore. — U.S. Bancorp said it will pay $1.6 billion in stock for Idaho's largest bank, West One Bancorp, strengthening its position as the biggest bank in the Pacific Northwest.
The marriage will create a regional bank based in Portland with $30 billion in assets, $21 billion in deposits and a market capitalization of more than $4 billion, placing it among the 30 largest banking organizations in the country.
The merger will mean the elimination of 1,100 jobs, or 7.5% of the banks' combined work forces, which will come mainly from duplicated branch offices and consolidation of the two head offices in Portland and Boise, Ida.
The cuts come on top of about two years of streamlining at U.S. Bancorp, which has slashed 24% of its work force through layoffs and sales of non-core subsidiaries.
Analysts said U.S. Bancorp's purchase price of about two times West One's book value was steep and that cost savings will not be enough to pay for the acquisition.
"This transaction appears unattractive" for U.S. Bancorp, Salomon Bros. Inc. analyst Andrew Brown told investors. He cut his 1996 earnings estimate by 20 cents to $2.75 a share. U.S. Bancorp said it expects West One to add to 1997 earnings and dilute 1996 earnings by 2%.
West One, with $8.7 billion in assets, has long been considered a natural fit with $21.4-billion-asset U.S. Bancorp, executives of the two companies said. The transaction will allow U.S. Bancorp to sell its products to more customers and help West One improve its aging computer systems.
The transaction will give U.S. Bancorp the No. 1 market share in Oregon, with 29% of the state's deposits in 221 branches. It will also be No. 1 in Idaho with 31% of the market and 100 branches.
In addition, U.S. Bancorp will increase its Washington market share from No. 5 to No. 3 with 11% of the market. The banking company will be No. 8 in Northern California, No. 4 in Nevada and No. 7 in Utah.
"Our company has thought about this transaction for at least 15 years," said Gerry B. Cameron, U.S. Bancorp's chairman and chief executive. "We always thought this would be about the best combination."
Under the agreement, each of West One's 36.8 million shares will be exchanged for 1.47 shares of U.S. Bancorp. The transaction valuation includes 2.7 million shares to redeem West One's 7.75% convertible subordinated debentures due in 2006, which are callable on July 1.
The transaction values of West One's shares at $39.32 each is based on U.S. Bancorp's closing price Friday. West One's book value--what is left after a bank's liabilities are subtracted from its assets--is about $20.25 a share.
After the transaction, U.S. Bancorp shareholders will own 64% of the company's stock, or about 98.2 million shares, while West One holders will have 54.1 million shares, or 36%. Insiders will hold 17% of the shares.
"It looks to be a pretty good deal" for West One shareholders, said Joseph Morford, an analyst with Alex. Brown & Sons Inc. "It's a premium they deserve, given their excellent franchise."
West One's stock climbed $1.375 to close at $33.50 on the Nasdaq market, while U.S. Bancorp's stock fell $2.125 to $24.625, also on Nasdaq.
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