Thursday, June 17, 1999

5/3 makes its biggest acquisition

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Deal for CNB expands base in Indiana

BY MIKE BOYER
The Cincinnati Enquirer

Fifth Third headquarters on Fountain Square. (Glenn Hartong photo) | ZOOM |

        In the biggest acquisition in its history, Fifth Third Bancorp. moved closer to becoming Ohio's second-largest bank Wednesday by buying CNB Bancshares Inc. of Evansville in a $2.4 billion stock deal.

        The acquisition needs approval from state and federal regulators and CNB shareholders. If it is realized — and no one expects major obstacles — Fifth Third would become Indiana's third-largest bank, trailing only Bank One Corp. of Chicago and National City Corp. of Cleveland.

        It also will give the Cincinnati bank $6.8 billion in assets and $4.4 billion in deposits in Indiana.

        “This is the biggest deal we've ever done, and we're very proud of it,” said George A. Schaefer Jr., Fifth Third's president and chief executive officer. “CNB is a prime franchise in Indiana. It's a good fit.”

THE NEW FIFTH THIRD

If shareholders and regulators approve the deal, here is how Fifth Third Bancorp would look after its $2.4 billion acquisition of Evansville-based CNB Bancshares is complete:   • Total assets: $36.9 billion.   • Branches: 678 offices and 1,400 ATM machines in seven states.   • Deposits: $23.8 billion.   • Loans: $21.9 billion.   • Employees: More than 10,000.

        The acquisition could also boost Fifth Third's employment in Greater Cincinnati. Mr. Schaefer hinted at more jobs coming to the Tristate because of the acquisition and a major expansion at the bank's new service center in Madisonville.

        It also broadens Fifth Third's banking empire. If the CNB deal and a $204 million acquisition of Emerald Financial Corp. of suburban Cleveland are completed, Fifth Third would be No. 2 behind National City in Ohio.

        CNB's shares surged Wednesday $13.87¹/₂, or 33 percent, to $55.31¹/₄. Fifth Third's shares fell $2.78í to $64.84î.

        Charles Vincent, director of research for PNC Bank, said the deal should be a good one for Fifth Third.

        “Their strategy is to work in their own marketplace and build the franchise,” he said.

        Fifth Third officials expect to complete the CNB acquisition by year's end. They said the deal should increase the bank's projected 2000 earnings per share of $2.68 by 4.7 percent to $2.81 a share. Earnings estimates for 2001 should jump by 5.2 percent to $3.26 a share.

        CNB, which operates Civitas Bank in Evansville, is Indiana's largest independent bank holding company. It has assets of $7.2 billion and 145 offices in Indiana, Michigan, Kentucky and Illinois.

        Fifth Third, which entered Indiana in 1987, now has $800 million in deposits and $1.5 billion in assets through 35 offices in Indiana. Most of those offices are in Indianapolis and the southeast part of the state.

        CNB, whose offices are concentrated in southwestern Indiana, also gives Fifth Third a foothold in southern Illinois and Michigan.

        There's little overlap between the two banking organizations, but Neal Arnold, Fifth Third's chief financial officer, said Fifth Third anticipates significant cost savings.

        The deal could cut CNB's annual expenses by 20 percent, or $40 million on pre-tax basis, Mr. Arnold said.

        For example, CNB now pays $600,000 a month for data processing services, which Fifth Third will be able to bring in-house.

        Mr. Arnold said merger talks with CNB began last year after both banks unsuccessfully bid on about a dozen Bank One offices in Indiana.

        “When you look at our Ohio, Kentucky, Indiana market area,” he said, “we have about 11 percent of the Ohio market but just 1 percent of the Indiana market. That's clearly an area we wanted to grow.”

        Despite strong operating performance, CNB's stock has lagged, he said and the bank was looking for an opportunity to grow.

        Under terms of the tax-free deal, Fifth Third will exchange .8825 shares of its stock, valued at $59.68 based on Tuesday's close, for each of 39.6 million CNB shares outstanding.

        The purchase price represents about 19 times CNB's projected 2000 earnings and 3.2 times its book value.

        The transaction also represents about 11 percent of Fifth Third's market capitalization.

        “This is a fairly typical transaction for us — low risk with a nice return,” Mr. Arnold said.

        Last year, Fifth Third expanded its Ohio operations by acquiring State Savings Co. of Columbus and CitFed Bancorp Inc. of Dayton. Mr. Schaefer said the CNB acquisition will be easier and less expensive because it will be a single conversion to Fifth Third's systems.

        Jim Giancola, CNB's president and CEO, will head Fifth Third's Indiana operations.

       

CEO sees plenty of room for growth

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