U.S. Bancorp Accepts $19 Billion Buyout Offer from Firstar Corp

Strategic Insights -

Brothers Jack and Jerry Grundhofer have led the charge in creating the nation's ninth-largest bank, following a $19 billion buyout offer from Firstar Corp. The deal, which combines both companies, promises to cure customer service woes at U.S. Bancorp and provide Firstar with the size and national distribution system it needs to remain competitive. The combined company, to be based in Minneapolis, will retain the U.S. Bancorp name and involve minimal layoffs. Local business leaders breathed a sigh of relief at the news, as the deal aims to keep the headquarters in Minneapolis, a move that will positively impact the Twin Cities, which has suffered from the loss of several financial services companies in recent years.

Key Takeaways:

  • The buyout deal, worth nearly $19 billion, combines U.S. Bancorp and Firstar Corp, creating the nation's ninth-largest bank with $160.6 billion in assets.
  • The combined company, to be based in Minneapolis, will be led by Jack Grundhofer as chairman until his retirement in 2002, and Jerry Grundhofer as chief executive.
  • U.S. Bancorp's customer service woes, which have been chronic for the company, are expected to be cured through the deal, according to Jack Grundhofer.
  • Firstar Corp is hoping the deal will give it the size and national distribution system it needs to compete with larger financial institutions, such as New York's Citigroup and Wells Fargo.
  • The deal will create a strong presence in the Twin Cities, with more than 10,000 of U.S. Bancorp's 31,000 employees working in Minnesota, including about 5,000 in St. Paul.
  • The combined company plans to sell off $500 million in deposits, primarily from Minnesota, as part of the deal.
  • The previously announced plan for a new $50 million office building and parking ramp in the Mississippi River flats will remain in place, with room for 750 employees initially and as many as 2,000 eventually.
  • Jack Grundhofer will retain his stake in U.S. Bancorp, valued at approximately $20.2 million, or about $1.7 million more than it was Tuesday.
  • Firstar would expand its offerings to include fast-growing markets in Southern California and the Pacific Northwest.

Statistics:

  • $19 billion: The value of the buyout deal between U.S. Bancorp and Firstar Corp.
  • 31,000: The number of employees of U.S. Bancorp.
  • 10,000: The number of U.S. Bancorp employees working in Minnesota.
  • 5,000: The number of U.S. Bancorp employees working in St. Paul.
  • $160.6 billion: The combined assets of the merged company.
  • 35%: The market share of the combined company in the Twin Cities.
  • $500 million: The amount of deposits the combined company plans to sell off.
  • $50 million: The cost of the new office building and parking ramp in the Mississippi River flats.
  • 750: The number of employees the new office building and parking ramp can accommodate initially.
  • 2,000: The number of employees the new office building and parking ramp can accommodate eventually.
  • $20: The closing price of Firstar shares on the day the deal was announced.
  • $25: The value of U.S. Bancorp shares based on the exchange rate with Firstar's common stock.
  • $8.9 billion: The value of the Mercantile Bancorp deal Firstar acquired in 1999.
  • 1996: The year that started the erosion of the financial services industry in the Twin Cities.
  • 29: The number of branches Firstar has in the Twin Cities.
  • 2002: The year Jack Grundhofer will retire as chairman of the combined company.

Sources:

  • Saint Paul Pioneer Press (St. Paul, Minn.)

http://www.pioneerplanet.com/

Distributed by Knight Ridder/Tribune Information Services.