BNP to Buy Commercial Federal for $1.36B

BNP Paribas (search) unit BancWest (search) has agreed to buy Commercial Federal Corporation (CFB) for $1.36 billion in cash, further strengthening the French bank's foothold in the western United States.

BNP Paribas said on Tuesday it expected the acquisition, made by BancWest Corp.'s Bank of the West, to yield cost savings of $54 million before tax.

It should also contribute some 11 percent to group revenues, based on its current scope, and 15 percent to profits, BNP Chief Executive Baudouin Prot told a news conference in Paris.

"Our strategy is clear: to achieve strong organic growth across all our activities and to complete targeted acquisitions in Europe, in emerging markets and in the United States," Prot said.

Under the deal, BancWest will pay $34.5 for each Commercial Federal share, including a one-time 50 cent-a-share dividend.

The purchase price is valued at 14.8 times Commercial's 2006 consensus prospective earnings and represents a 27 percent premium to the average closing price of Commercial Federal's stock over the past six months.

Commercial Federal (search), headquartered in Omaha, Nebraska, made a net income of $76 million on revenues of $382 million in 2004, producing a return on equity of 10.1 percent.

The transaction, expected to close in the fourth quarter, has been approved by the respective boards of directors. It still requires approval from Commercial Federal shareholders and state and federal banking regulators.

Commercial Federal branches will become part of San Francisco-based Bank of the West once the deal closes and trade under the name Bank of the West, a subsidiary of BancWest.

"It's a logical extension of Bank of the West's expansion into the Midwest which began with last year's acquisition of Community First Bankshares," BancWest President and Chief Executive Don McGrath said in a statement.

"We'll add dramatically to our market share in Denver — we'll have nearly 100 Colorado branches. We will also become one of the leading banks in Omaha (Nebraska) and Des Moines (Iowa)," McGrath said.

Shares in Commercial Federal closed at $25.94 on the New York Stock Exchange on Monday while shares in BNP Paribas were down 0.62 percent at 55.90 euros at 1122 GMT.

BNP Paribas was advised by Morgan Stanley, Lehman Brothers and Goldman Sachs.