Wells Fargo & Co.'s stock price soared Friday as rumors swirled on Wall Street that the San Francisco-based banking company is close to striking a merger pact with U.S. Bancorp of Minneapolis.
Both companies declined to comment on the speculation. But with the banking industry in the midst of a merger frenzy, investors disregarded the silence and sent the stocks of both banks sharply higher.
For the Record
Los Angeles Times Tuesday May 5, 1998 Home Edition Business Part D Page 3 Financial Desk 1 inches; 30 words Type of Material: Correction
John Grundhofer--Executive John Grundhofer left Wells Fargo & Co. and became president and chief executive of U.S. Bancorp, formerly known as First Bank System Inc., in 1990. A story Saturday misstated the date.
Wells' stock soared $18.75 a share, or 5%, to $387.25, and U.S. Bancorp rose $3 a share, to $130, both in New York Stock Exchange composite trading.
Merger speculation has been swelling for weeks, fueled by Wells' West Coast rival BankAmerica Corp. agreeing to a $62.5-billion merger with NationsBank Corp. of Charlotte, N.C., Washington Mutual Inc. agreeing to buy Home Savings parent H.F. Ahmanson & Co., and Citicorp and Travelers Group Inc. striking an $83-billion deal in the biggest merger proposal in history.
Those blockbuster marriages--reflecting the banks' desire not only to expand their geographic presence but also to broaden the array of services they can offer--focused a spotlight on Wells and other major banks that would be quickly overwhelmed in size by the new behemoths being formed.
Wells Fargo and U.S. Bancorp are thought to be suitable partners because their merger would meld Wells' major presence in California and nine other Western states with U.S. Bancorp's 17-state coverage in the West (including California) and across the northern tier of the nation.
Wells--with nearly $100 billion in assets, 1,900 branches and 4,400 automated teller machines--currently is the nation's eighth-largest banking company (assuming the pending mergers are completed). U.S. Bancorp has about $71 billion in assets.
There are other reasons industry watchers are betting heavily on the companies' merger: U.S. Bancorp's chief executive and president, John F. Grundhofer, is a former Wells executive and a longtime friend and rival of Wells' chairman and chief executive, Paul Hazen.
Grundhofer, a native of Glendale, and Hazen worked together early in their careers as vice presidents for Union Bank in Orange County. They left in the early 1970s to work for Carl Reichardt, the legendary Wells chief executive who schooled them in his streamlined approach to banking.
But in 1995, after Hazen captured the chairman's job at Wells upon Reichardt's retirement, Grundhofer left for Minneapolis to run First Bank System Inc.
The two knocked heads months later in a fierce battle to acquire First Interstate Bank. Hazen and Wells won that one too. Grundhofer and his bank then bought U.S. Bancorp of Portland, Ore., last year, and adopted that name.
Now, some industry trackers are suggesting that Grundhofer could ultimately wind up running Wells Fargo. While Wells has struggled to digest its purchase of First Interstate, Grundhofer and U.S. Bancorp have smoothly integrated their acquisitions, analysts said. (U.S. Bancorp, in fact, completed its purchase of the brokerage firm Piper Jaffray Cos. on Friday.)
"I don't think a deal would even occur unless Grundhofer is in charge," said Campbell Chaney, a banking analyst with the securities firm Sandler O'Neill & Partners in Walnut Creek, Calif. "Wells and its management team are now having to build credibility with investors, while Grundhofer and U.S. Bancorp came through [their mergers] without a hiccup."
Financially, though, Chaney said a deal would probably be structured as a "merger of equals" rather than as a purchase of Wells by U.S. Bancorp, because Wells is a bigger company by several measures.