New name in chase for LaSalle - Local market leader JPMorgan Chase may enter bidding
By Becky Yerak, Tribune staff reporter.
Copyright © 2007, Chicago Tribune - Bloomberg News contributed to this report
Published April 27, 2007
A marriage of LaSalle and Chase?
As ABN Amro Holding NV seeks more offers for its LaSalle Bank unit, JPMorgan Chase could jump into the bidding war, but any offer it made would raise regulatory red flags because of its potential impact on the Chicago banking scene, industry observers said Thursday.
At its annual shareholder meeting Thursday in Europe, ABN said it is "soliciting alternative bids" for LaSalle, which at the moment is slated to be sold to Bank of America Corp. for $21 billion.
But ABN is deep in the middle of the financial-services industry's biggest takeover battle, so LaSalle's future is uncertain.
On Monday, Barclays PLC offered $91 billion for ABN, and as part of the deal ABN agreed to sell LaSalle, Chicago's No. 2 bank, to Bank of America.
Two days later , Royal Bank of Scotland Group PLC and two other European banks offered $98.6 billion for ABN, hinging on the scuttling of Bank of America's purchase of LaSalle, which RBS covets.
Thursday, ABN defended its proposed sale of LaSalle to Bank of America but said it hopes "another bidder will come along," and it "wouldn't mind if it's Royal Bank of Scotland."
The receptivity to new offers immediately sent tongues wagging about who else could bid for LaSalle, and at least one analyst prominently mentioned Chicago's No. 1 and No. 3 banks.
Market share leader JPMorgan Chase or BMO Financial Group, parent of No. 3 Harris Bank, "could enter the arena" and bid on LaSalle, Sigrid Baas, an analyst for ING Wholesale Banking, said in a report Thursday.
Chase has Chicago-area market share of 15.3 percent, edging out LaSalle's 14.1 percent. Harris has 9.5 percent.
Although a Federal Deposit Insurance Corp. study has shown that Chicago is the banking industry's most competitive U.S. major metropolitan area, antitrust watchdogs would take a hard look at a combination of Chase and LaSalle, bank industry observers say.
Bank Advisory Group LLC, an Austin, Texas-based mergers and acquisitions consultant, said the Chicago area's score on a banking competitiveness index is 743.
Anything above 1,800 is considered "highly concentrated," or less competitive. "Less than 1,800 is considered not highly concentrated and, therefore, highly competitive," Bank Advisory President Stephen Skaggs said Thursday.
Chicago's score would rise nearly 75 percent, to 1,300, if Chase bought LaSalle, he said.
"That would cause somebody, somewhere, some heartburn," Skaggs said.
Even at 1,300, Chicago would remain a competitive banking market, but "you'd be talking about the banks with the No. 1 and No. 2 market shares combining, and I don't think that would be looked on very favorably," Skaggs said.
"Technically, by the numbers, it would not result in a concentrated market, but regulators would be more enthused if it was the second and third banks, or the second and fourth, or the first and fifth," he said. "The smell test on that would be a lot easier to accommodate than No. 1 and No. 2.
"Plus, there's no telling the heat that the Justice Department would get from the congressional delegation, so I don't imagine Chase is looking real hard at this."
Baylor Lancaster, regional banking analyst for CreditSights, agreed.
"There definitely would have to be some divestitures, especially in Chicago," Lancaster said. "And I'm not sure that would be Chase's first choice, since RBS and Bank of America are hot on the case" of LaSalle.
The bidding for LaSalle likely will come down to RBS and Bank of America, she said.
"You're already talking about a high price, so there are a limited number with those deep pockets," Lancaster said.
Citibank has the wherewithal and would benefit from LaSalle's branch footprint -- 140 locations in the Chicago area and 260 in Indiana and Michigan -- but "it doesn't seem like they've been really interested in this deal," Lancaster said.
Abol Jalilvand, dean of the business administration school of Loyola University Chicago, said Chase's newfound clout through LaSalle would set off antitrust alarm bells. But if it really wanted LaSalle, it would divest whatever it needed to get the deal done, he said.
Indeed, Chase has made dramatic deals in the past to gain a more dominant toehold.
When it bought Bank One in 2004, its Houston market share was set to shoot up to 47 percent, the Dallas Morning News reported at the time.
A trade publication later reported that Chase had transferred "several billion" in deposits out of Texas as activists raised concerns.
The latest FDIC numbers show that JPMorgan Chase has Houston-area market share of 29.3 percent, followed by Bank of America's 10.3 percent.
In New York, Chase had market share of 26.4 percent as of June 30, 2006. Last fall, it acquired the retail banking business of Bank of New York, which had market share of 4.5 percent. The deal gave Chase a total of about 800 branches in the New York area.
In the Chicago area, Chase has about 340 branches, so a deal for LaSalle likely would result in overlapping branches, raising the issue of layoffs.