Merc bought by Firstar for $10.6 B

by Paul Flemming

SBJ Staff

Mercantile Bank, the largest bank in Missouri's three largest markets, including Springfield, has agreed to be acquired by Milwaukee-based Firstar Corporation for about $10.6 billion.

The acquisition ends long speculation that Mercantile Bancorp Inc. would be bought in continuing banking-industry consolidation. The deal also reverses roles for Mercantile, which had pursued an aggressive growth-through-acquisition strategy during the last two years. Mercantile acquired Mark Twain Bank and Roosevelt Financial Group in 1996 to supplant NationsBank, ne? Boatmen's Bank, as the state's preeminent bank-deposit holder.

Steve Harmon, president of Mercantile Bank in Springfield and Branson, said he learned of the deal the morning of May 1 when he opened the newspaper. Steve Clark, local vice president of retail banking, said a client called him the evening of April 30 with the news that was announced after the markets closed that day.

"We're relieved and excited," Harmon said. "Every preliminary indication is this is a first-class organization."

He said bank executives have talked to clients and employees, assuring them there will be little change.

"'Are you going to be here?' That's what clients want to know," Harmon said.

"People bank with people," Clark said, diminishing the importance of a bank's corporate ownership or its name. Mercantile will take on the Firstar name.

Mercantile and other banking executives in Springfield said they did not expect the same upheaval that resulted after the NationsBank merger with Boatmen's Bank in 1997.

"This is more a merger of equals. It's two similar associations," Clark said. "I don't think it's going to be a culture clash."

"Certainly we'll try to make some hay out of this," said Frank Hilton, president and chief executive officer of Citizens National Bank. "We'll look for dissatisfied customers and dissatisfied employees. I don't give it the same scope (as the NationsBank merger), but it's significant."

In Springfield, Mercantile has $578 million in assets and $552 million in deposits as of Dec. 31, 1998.

Firstar has assets of $38 billion to Mercantile's $36 billion in assets. Firstar, too, has grown via acquisition. In November 1998, Star Banc Corp. acquired Firstar for $7 billion and took its name.

Neither Harmon nor Clark are new to corporate changes. Both came to Mercantile through a series of acquisitions of previous employers. Harmon has been with Mercantile since 1992, when the bank acquired AmeriBank.

"We sat for six months of really not knowing much" during the acquisition. Now Harmon expects a "more aggressive period of transition. I expect the next 30 days we'll be rolling out information, and in 90 days we'll know what it will look like."

"We're just trying to focus on what we're doing," said Bob Hammerschmidt, president and CEO of Commerce Bank in Springfield. "I honestly don't think it's really any big deal. But that will depend on how they execute their plan."

Firstar President and CEO Jerry Grundhofer has gained a reputation for fast action and cost cutting with previous acquisitions. He announced intentions to cut Mercantile expenses 19 percent, or $169 million, in the next year.

"I don't think they let grass grow under their feet," Harmon said of Firstar executives. "We want to move quickly and get in the swing of things."

Harmon said cost cutting would not be visible at the customer-service level. Centralization of back-office operations and culling locations has already taken place in the wake of acquisitions at Mercantile, he said.

Further mergers may be on the way, as well. Though Harmon said further acquisitions in Missouri are unlikely, other possibilities loom. Grundhofer is "an aggressive guy. If he sees an opportunity, he'll pursue it."

Firstar CEO Grundhofer's brother, John Grundhofer, is CEO of Minneapolis-based U.S. Bancorp.

"I wonder if the Grundhofer brothers will get together," Commerce's Hammerschmidt said. "I just wonder if there won't be another deal after this. I think there will. But that's just my personal, gut feeling."

Mercantile shareholders will get 2.091 shares of Firstar stock in the deal.