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Devil in the Details
Sorting out winners, losers in Fleet-BankBoston merger
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Business New Haven
3/22/1999
By: BNH
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The Fleet Financial Corp.-BankBoston merger announced March 14 certainly creates an 800-pound gorilla in New England banking. But that gorilla will be forced to shed some avoir dupuis as a result of the deal, thereby creating opportunities for some smaller banks to get bigger.
The giant new entity created by the merger, to be known temporarily as Fleet Boston Corp., will have to sell off $13 billion in deposits as well as a yet-unspecified number of automated teller machines in order to pass regulatory muster. Fleet and BankBoston executives had said they expected to close a couple of dozen branches and lay off between 4,000 and 5,000 employees throughout the six-state region. Presently the two institutions have about 60,000 workers worldwide.
Just who will get those deposits is open to conjecture. A large national bank such as Bank America or First Union might hope to acquire them in order automatically to establish a strong New England presence.
However, Fleet - the larger of the merged banks - would probably do whatever was necessary to prevent another big bank from entering the region. If so, it might instead look to sell deposits to smaller, local competitors such as the Providence, R.I.-based Citizens Financial Group, which in 1997 acquired the Bank of New Haven.
There is precedent here. In 1995, when Fleet bought Shawmut National Corp., it spun off some Ocean State branches into a new bank called the Bank of Rhode Island. However, banking analysts noted that a sell-off to seal the Fleet-BankBoston merger would be far greater in scope than any previous deals.
Since both Fleet and BankBoston are headquartered in the Bay State, “They don't have to come to us for regulatory approval on this transaction,” said David Tedeschi of the Connecticut Department of Banking. However, State Attorney General Richard Blumenthal said he would “closely scrutinize” the deal under existing anti-trust statutes to ensure that the interests of Connecticut consumers were protected.
The stock-for-stock deal, valued at $16 billion, creates the nation's eighth-largest bank, with $178 million in assets.
Fleet CEO Terrence Murray, 59, will become chairman and chief executive of the new company for two years. During that period his BankBoston counterpart, Charles K. (Chad) Gifford, will function in the No. 2 position as president and chief operating officer. At the end of 2001 Murray will retire as CEO but remain as chairman, leaving the 56-year-old Gifford to run the company, it was announced.
Fleet's earnings last year were $1.58 billion, compared to 879.2 million for BankBoston.
Of the ten-largest New England banks a decade ago, only Fleet, US Trust and State Street Corp. of Boston thus remain independent. The rest have been acquired by either BankBoston or Fleet.
For Fleet and BankBoston customers, the immediate impact of the announcement is likely to be nil. Details of the merger will take some six months to be hashed out, and by law the two banks must operate independently until final regulatory approval is obtained.
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