Wells Fargo buying National Bank of Alaska
ANCHORAGE, Alaska – National Bank of Alaska, the state’s largest financial institution, has agreed to a buyout by Wells Fargo & Co. for $907 million, bank officials announced Tuesday.
NBA’s board of directors signed a letter of intent with Wells Fargo that calls for the San Francisco-based banking giant to exchange its stock for NBA shareholders. The exchange is valued at $30 per share.
NBA stock has had a wild ride in the past 10 days as buyout rumors flourished. Shares rose from about $25 in early December to $42 on Tuesday before finishing the day at $39.75, or nearly 33 percent above the deal price.
Ed Rasmuson, NBA chairman, said his company’s future was clouded by recent changes in federal law that allow banks, insurance companies and securities firms to merge and sell each other’s products.
”There were a number of unresolved issues,” he said at NBA’s headquarters in Anchorage. ”First, the challenge of a regional bank surviving with the changing financial climate that is upon us. To adequately compete, I have always said that we need to be part of a large financial company.”
NBA has assets of nearly $3 billion, a tiny fraction of the $200 billion in assets controlled by Wells Fargo, which became the nation’s seventh largest bank when it merged with Minneapolis-based Norwest Corp. in November 1998.
The deal is expected to close by May, with the NBA name being replaced by Wells Fargo within two years.
Rasmuson, whose family owns about 60 percent of NBA stock, said NBA approached Wells Fargo about a deal.
”We felt the timing was right,” he said. ”I can assure you it was not an easy decision on my part or my dad’s.
The Rasmuson family has been associated with NBA since the bank was founded in the gold rush town of Skagway in 1916. It now has 54 branch offices across the state.
E.A. Rasmuson started out as the bank’s lawyer and later became its first president and chairman. He was succeeded by his son Elmer, now 90 years old, who was replaced as chairman by his son Ed in 1985.
The bank has long been one of the nation’s most conservative lending institutions, a trait that allowed it to easily weather the near collapse of Alaska’s banking system in the late 1980s, when low oil prices devastated the state’s speculation-driven real estate market.
For the first three quarters of 1999, the bank reported profits of nearly $50 million, up 16 percent from the same period a year earlier.
John Nelson, Wells Fargo executive vice president, said NBA’s solid stature appealed to his company.
”It’s the best bank in Alaska, and we really want to be in Alaska,” he said. ”This is the best way to do it.”
Analysts who watch Wells Fargo say its style is to buy up smaller banks and then integrate them into the corporate network while leaving current management intact to minimize customer disruption.
”The reason they do these small deals is what we call ‘in-fill acquisition,’ meaning there’s a hole within a submarket that Wells Fargo is trying to fill,” said Campbell Chaney, an analyst at Sutro & Co. in San Francisco.
”For Alaska, it’s entrance into a new state,” he said. ”They don’t want to jump in unless they’re first, second or third in the market – preferably first.”
Wells Fargo now has more than 3,500 bank branches in 21 states, according to the company’s web site. It also offers investments, insurance, mortgage loans and consumer finance.
Chaney said along with the NBA deal, Wells Fargo is in the process of buying up small banks in New Mexico, Texas, Michigan and California, and the Seattle-based brokerage firm Ragen MacKenzie.
Joseph Morford, an analyst at Dain Rauscher Wessels in San Francisco, said the federal law change that opens the financial services field is making it harder on regional banks like NBA.
”Customers are demanding greater convenience, and access to more products and distribution channels,” Morford said. ”In many cases, small banks are better off teaming up with larger institutions.”
The deal won’t be final until Wells Fargo shareholders and federal regulators approve the combination.
The federal Office of the Comptroller of the Currency and the Federal Reserve will have to endorse the deal.
Kevin Mukri, a spokesman for the currency office in Washington, D.C., said his agency will make sure there are no anti-competitive issues and that Wells Fargo continues to comply with the federal Community Reinvestment Act, which requires banks to loan money in low-income neighborhoods.
Mukri said it is rare that bank mergers are rejected because the banks know the rules and work with OCC.
”There’s a lot of dialogue because the parties want this to go through without a lot of wrinkles,” he said.
Terry Elder, director of the state Division of Banking, Securities and Corporations, said his office has no role to play in the Wells Fargo-NBA deal because they are nationally chartered banks.
Barbara Ritchie, deputy attorney general in Juneau, said her office hasn’t taken a position on whether the deal is subject to state review.
State lawyers have gotten involved in a pair of high-profile mergers in Alaska in the past year, one between grocers Safeway Inc. and Carr Gottstein Foods Co. and the other in the oil patch between BP Amoco PLC and Atlantic Richfield Co.
Both of those cases were fueled by fears of less competition that would hurt Alaskans.