Directors of ailing BankAmerica Corp. have asked for further information on a $2.78 billion merger offer from First Interstate Bancorp, but industry analysts predicted Tuesday that it will nevertheless reject the bid as inadequate.
The proposal, which BankAmerica received in a letter Friday, would join the nation`s second and ninth largest bank holding companies.
BankAmerica, based in San Francisco, previously rejected two informal takeover proposals from Joseph J. Pinola, chairman of Los Angeles-based First Interstate.
A BankAmerica spokesman said the latest proposal was a formal offer, but he refused to give details of the bid. He said the firm`s directors, at a regularly scheduled meeting Monday, authorized management to obtain
”additional information” on the offer.
The First Interstate offer was estimated to have a value of approximately $18 per BankAmerica share.
”I think they will reject it as inadequate, but I also feel First Interstate has the room to raise the bid,” said Mark Biderman, banking analyst at Oppenheimer & Co.
Analyst Lawrence H. Cohn, of Merrill Lynch Capital Markets Inc., put the chances at ”no better than 50-50” that BankAmerica would accept the proposal.
Any change in a bank`s ownership would have to be cleared by the U.S. Comptroller of the Currency and the Federal Reserve Board.
Speculation that BankAmerica might be a takeover target was rekindled after the firm reported a huge $640 million loss for the second quarter of 1986, which followed a major deficit posted for 1985.
Most analysts expect the banking firm to report another loss for the third quarter ended Sept. 30, but estimates varied widely. Biderman said the loss could approximate $25 million, after special gains totaling about $100 million realized from the sale of BankAmerica`s interest in a Los Angeles office building and of its automobile leasing subsidiary.
”I`m anticipating that it will be a breakeven quarter, give or take a few million dollars,” said Cohn. ”But after payment of the preferred dividend, there could be a loss per common share. On an operating basis, the loss could be about $100 million.
However, Cohn said BankAmerica could decide to make another major writeoff of poor-quality loans or realize additional losses through other moves.
”Their greatest offense in this case could be their weakness,” he said. Cohn said First Interstate shareholders would suffer in the near term if the firm succeeded in acquiring BankAmerica. ”It`s a very troubled bank,” he said. ”First Interstate really hasn`t had an opportunity to look at the books.”
On the other hand, Cohn said that Pinola, who once worked for BankAmerica, ”wants to run a really large bank.”
Under the buyout proposal, each of BankAmerica`s 154 million shares of common stock would be exchanged for 0.22 of a share of First Interstate common stock and one share of preferred stock with a value estimated by First Interstate`s investment banker, Goldman Sachs & Co., at $6 a share.
Based on current market prices, the BankAmerica shares would be exchanged for First Interstate shares valued at approximately $12 each, or $924 million, and preferred stock worth $6 each, or $1.85 billion.
BankAmerica had $118.5 billion in assets at the start of the year, while First Interstate`s assets totaled $49 billion.
If approved by stockholders and federal regulators, the merger would create a company with $168 billion in assets and offices in 15 Western states.
