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First Bank System and First Interstate Bank Announce $10.3 Billion Merger

Strategic Insights

— 1 min read

First Bank System and First Interstate Bank have entered into a definitive agreement to merge, resulting in a new institution with assets of $92.4 billion and a presence in 21 states. The merger, subject to shareholder and regulatory approvals, is expected to close in the second quarter of 1996. The new institution will retain the First Interstate name and will have a strong commitment to community support in Los Angeles.

Key Takeaways:

  • The merger is valued at $10.3 billion, with First Bank System exchanging 2.6 shares of its common stock for each share of First Interstate.
  • The transaction represents a premium of 25% over the closing price of First Interstate stock on October 17, 1995.
  • The merger is expected to result in accretion to 1997 EPS of approximately 18% and a return on common equity of approximately 26.5%.
  • The new institution will have a diverse and expanded interstate franchise, significantly insulating it from local or regional economic downturns.
  • The merger is expected to result in annual cost savings of $500 million, or 22% of First Interstate's expenses.
  • The new Board of Directors will include representatives from both companies, with John F. Grundhofer serving as Chairman and Chief Executive Officer, and William E. B. Siart as President and Chief Operating Officer.
  • The merger represents a significant advancement in the banking industry, with the two companies having exemplary CRA records and a compatible, customer-driven culture.
  • The new institution will maintain a strong level of community support in Los Angeles, with a commitment to ongoing community involvement and support.

Statistics:

  • Assets of the new institution: $92.4 billion
  • Shareholders' equity: $7.3 billion
  • Number of households served: 7.6 million
  • Bank locations: 1,514
  • ATMs: 4,692
  • Expected accretion to 1997 EPS: 18%
  • Expected return on common equity: 26.5%
  • Expected annual cost savings: $500 million
  • Date of expected closing: Second quarter of 1996

Sources:

  • First Bank System, Inc. (NYSE:FBS)
  • First Interstate Bank (NYSE:I)
  • Business Wire (November 6, 1995)
  • Infrared Inc. (November 6, 1995)
  • First Interstate Bank Corporate website (archived)
  • Wells Fargo & Co. (NYSE:WFC) (for context on Wells Fargo merger proposal)
  • First Interstate Bank (Los Angeles) (for corporate and media contacts)

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