A year of big deals, big busts
Triangle Business Journal
In the North Carolina banking industry, 2001 was a year of memorable mergers.
And leading the cast of players were, in the year's biggest deal, First Union of Charlotte and Wachovia Bank of Winston-Salem. Rocky Mount-based Cen-tura and the Royal Bank of Canada combined in 2001's second-most-notable merger.
By far, though, most of the ink and attention went to the combination of First Union and Wachovia, a $12.8 billion deal that created a new banking colossus with $330 billion in assets and 2,900 branches stretching from Connecticut to Florida.
A third party added a large dose of drama to the episode throughout the summer of 2001. Atlanta-based SunTrust Banks, in an 11th-hour bid, offered a $14 billion deal for Wachovia, and then proceeded to launch a public relations blitz for the hearts and minds of Wachovia shareholders.
That blitz was matched, and exceeded, by an equally aggressive PR campaign by First Union, which ultimately won the day when, in early August, Wachovia shareholders approved a merger with First Union.
With the fireworks finally over, officials at both banking institutions then began the actual work of combining the two operations, a process that will take months, if not years, to complete.
The entity, the nation's fourth-largest bank, will take the Wa-chovia name. Unoffi-cially, it's being re-ferred to as the "new" Wachovia.
The to-do list for pulling off the merger started with naming a new roster of top managers, a task largely completed. Next will come combining the operations' computer systems and, finally, sorting out which branch offices will remain and which will close or be sold.
Duplicate branch offices are not a concern in the $2.3 billion combination of Centura and Royal Bank of Canada.
Executives of RBC, Canada's largest banking institution, made no bones about their intention to use the Centura acquisition as its foothold and springboard to grow its franchise in the United States.
Indeed, just five weeks after the deal was completed, RBC Centura executives said they planned to gear up for a major expansion in the Southeast and are considering opening new lending offices in several of the region's largest markets, including Atlanta, Washington, D.C., and Tampa.
They hastened to add, however, that the new regional focus doesn't mean that the renamed RBC Centura will be turning its back on what it considers its home turf. The bank, they said, will continue to look for acquisitions in North Carolina, South Carolina and Virginia, where it already has 243 branches and $12 billion in assets.
The merger with RBC also opens another new horizon for Centura, namely greater flexibility in investing in technology and life-sciences startups.
Bank officials are busy setting up a venture capital fund that will make loans of up to $1 million to companies closing in on their next round. Executives also plan to offer senior debt financing and will set up a North Carolina version of RBC's Technology Investment Banking Group, which guides companies from seed stage to buyout.
This was a watershed year for Blue Cross Blue Shield of North Carolina.
The managed health-care plan started 2001 as a Chapel Hill-based not-for-profit with about 2 million members statewide. It ends the year preparing to convert to for-profit status, considering a public offering of stock and blinking brightly on the radar screen of three large, acquisition-hungry suitors.
During the year, BCBS of North Carolina reported an annual operating profit for the first time since 1994 and spent $202 million to buy Partners National Health Plans of North Carolina, a Winston-Salem-based health plan with about 500,000 members in the Carolinas and Virginia.
It's all a radical departure from the insurance-for-everybody mission that created Blue plans nationwide during the Depression.
As not-for-profits, Blues tend to operate to break even and rely on reserves and investments to get into the black. As for-profits, they strive for operating profits. And as publicly traded companies, shareholder oversight could change the way premiums are set as well as the way providers are reimbursed.
Considering, though, that the number of independent, not-for-profit Blues is expected to drop to as few as 20 in the next five years, the sea change at BCBS of North Carolina is right in step with a major industry trend.
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