Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 29, 1994 TAG: 9401290042
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: CHICAGO LENGTH: Medium
The deal would strengthen San Francisco-based BankAmerica's position as the nation's second-largest banking company and give it a major presence in Midwestern business banking, Continental's specialty.
Customers of Continental, the nation's 33rd-largest bank and survivor of near-failure a decade ago, will benefit from BankAmerica's greater lending ability, its broad Asian connections and technological improvements, bank officers said.
The two companies said they expect to eliminate 500 to 800 jobs as offices in New York, Chicago, Los Angeles and other major cities are combined.
The banks didn't say which organization would bear the brunt of the cuts. BankAmerica has 96,000 workers and Continental has 4,200. There would be a minimal number of job reductions, because "the goal is expansion rather than consolidation," said BankAmerica Chairman Richard M. Rosenberg.
The combination will raise BankAmerica's assets to about $209.6 billion, leaving it second only to the nation's biggest banking company, Citicorp of New York, which has about $220 billion in assets. Continental has assets of $22.6 billion.
After the merger, Continental would be renamed Bank of America Illinois.
Rosenberg said BankAmerica would move the headquarters of its U.S. corporate banking group to Chicago from San Francisco.
Wall Street's reaction was enthusiastic. Continental's stock was up $6.75 at $34.62 1/2 in late trading on the New York Stock Exchange. BankAmerica was unchanged at $45.75 a share; the acquiring company in a merger usually experiences a decline in stock price because of the burden of the acquisition.
Continental was rescued from the brink of failure by federal bank regulators in May 1984. A rumor carried on a small Japanese news service that Continental was struggling with a cash-flow crisis touched off what was the largest bank run in history at the time. Continental lost $1.16 billion.
Federal officials quickly decided that Continental, then the nation's seventh-largest bank, was too big to fail. The collapse of a bank that size held unthinkable implications for the banking industry.
The government put up $4.5 billion to make sure the bank remained open. Ultimately, vigorous collection of bad debts reduced the government's rescue costs to about $1 billion.
It wasn't until June 1991 that Continental returned to complete public ownership.
Under the proposed deal, BankAmerica would acquire Continental for 21.25 million shares of BankAmerica common stock and $939 million in cash.
by CNB