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Banks Plan A Merger In Detroit
By MICHAEL QUINT
Published: New York Times: October 29, 1991
Two strong Detroit-based banking companies, Comerica Inc. and the Manufacturers National Corporation, announced plans yesterday for a friendly merger that would create one of the nation's 25 largest banking companies and the largest in the Detroit market.
The new company, which plans to operate under the Comerica name and will have total assets of $26.8 billion, intends to cut costs by eliminating duplicated operations of the two former competitors. By closing 60 of their combined 413 branches and eliminating 1,800 of their 13,500 jobs, mostly through attrition and retirement, the new Comerica expects to save about $145 million annually by 1994. In the first nine months of this year, the two companies had combined profits of $199.5 million, up 9.5 percent from $182.2 million last year.
Comerica and Manufacturers National have similar business profiles, with heavy reliance on low-cost consumer deposits and good records for avoiding bad loans. The companies agreed that Gerald V. MacDonald, the 52-year-old chairman of Manufacturers National, would initially be the chief executive of the newly merged bank and that he would be followed in 1994 by Eugene A. Miller, now chief executive of Comerica.
Mr. MacDonald said that after the merger was completed, "We have every reason to believe we will be actively involved in other merger opportunities across the nation."
At yesterday's closing price for Comerica stock, the merger is worth about $1.23 billion, based on the exchange of 0.81 share of Comerica stock for each share of Manufacturers National.
The merger plan won a hearty endorsement in the stock market, with prices of both companies jumping sharply. Comerica closed at $47.875, up $5, on the New York Stock Exchange, while Manufacturers National rose $3.75, to $37.50, in over-the-counter trading.
Comerica is a nationally recognized lender to automobile dealers, and it has a sizable business with medium-sized companies in California. Manufacturers National has a highly profitable subisidary, John V. Carr & Son, which specializes in freight forwarding and helping companies move goods through customs.
Both companies avoided the rapid increase in commercial real estate loans in the late 1980's that is now troubling many other banks.
The merger, which follows the announced combination six weeks ago of the First of America Corporation, Kalamazoo, Mich., and Security Bancorp, Detroit, will leave the NBD Corporation and the Michigan National Corporation as the two largest Michigan banking companies not involved in large mergers.
NBD, owner of the National Bank of Detroit, also has a strong profit record and is widely expected to be an active buyer of other banks. Michigan National, which has been hurt by losses on commercial real estate loans recently, is not so strong as its Michigan rivals.
Michael E. Martin, a director at the First Boston Corporation and an adviser to Comerica, noted that Comerica's size and the value of its stock were now on a par with other expansion-minded companies like Banc One of Columbus, Ohio; Norwest Financial in Minneapolis, National City in Cleveland, and PNC Financial, Pittsburgh.
Chris Kotowski, a banking analyst at Oppenheimer & Company, said, "Bankers are assuming that internal growth is not going to be there for a while, and they are all thinking about how they can expand through mergers and acquisitions."
He noted that the terms of the merger were "very favorable" to shareholders of both companies.
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