Per my friend’s request, here’s data from my research and my personal opinions regarding the AmSouth (ASO) /Regions (RF) merger.
Data:
- Combination of both firms (Regions)
- 37,000+ employee, however up to 10% of positions duplicated; no official job loss numbers announced
- “Both RF and ASO have poor track records of achieving targeted merger integration synergies in a timely manner”
- Jackson W. Moore, RF chairman, president and CEO will serve as chairman of the board
- C. Dowd Ritter, chairman, president and CEO of ASO will serve as president and CEO
- Transaction announced in May, approved by shareholders in October, to be closed in November
- 37,000+ employee, however up to 10% of positions duplicated; no official job loss numbers announced
- RF:
- Strong 3Q earnings due to:
- Cost control (layoffs a factor)
- Better credit quality
- Lower loan loss provisions
- higher spread income
- Weaker fee income
- $150M cost savings in 07;$350M in 08 (achieves full run-rate)
- Divesting 52 branches
- Recent (Oct.) Neutral/Buy ratings upgrade by Lehman, Banc of America, Punk Ziegel, Friedman Billings Ramsey
- Volatility risk: low
- Strong 3Q earnings due to:
- ASO
- Declared dividends in July
- Announced share repurchase in April to be used for merger announced in May
- Buy upgrade, raising target price: Friedman Billings Ramsey, Ryan Beck, Punk Ziegel
- Sell/equalweight downgrade: Sandler O`Neill, Morgan Stanley
- AmSouth/Regions Consolidated Balance Sheet
- AmSouth/Regions Consolidated Income Statement
Conclusion:
- Not so much a “merger”, but more of an acquisition as RF is absorbing ASO and keeping its name
- Less merger synergies than expected
- Main reason for merger: cost savings, larger economy of scale
- No foreseeable growth in 07
- Upgraded ratings due to financial sector’s strong performance during economic slowdowns, not long-term
- ASO will most likely go through a significant culture change when adapting RF’s identity. This has happened numerous times historically within the financial sector. For example Wachovia & First Union’s merger; although First Union was the lager firm, Wachovia had better reputation and its identity was retained.
If you are reading this and are a manager, you may want to check out the Managing During Mergers and Acquisitions podcast (part 1, part 2) from Manager Tools.
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