Banc One to Buy First USA for $6.75 Billion

After watching AT&T;, General Motors and independent credit card companies capture a growing share of the consumer credit business, Banc One made its own move Monday by announcing plans to acquire First USA for $6.75 billion.

The deal would create the nation’s third-largest credit card operation, with a combined 32 million cardholders, marrying the nation’s 10th-largest bank with one of the fastest-growing credit card companies.

If the deal is completed, Columbus, Ohio-based Banc One will trail only Citicorp and AT&T; in the number of credit cards issued. First USA offers both Visa and MasterCard.

The combined operation would have assets of $35 billion, though Dallas-based First USA is expected to operate under its current name.

The companies said they do not expect layoffs to result from the deal.

“First USA will add a powerful new dimension to our competitive arsenal and significantly change the way Banc One can compete in the consumer financial services business,” said John B. McCoy, Banc One’s chairman and chief executive.

McCoy foreshadowed the deal in a 1993 letter to shareholders in the company’s annual report. The letter cited the growing influence of nonbanking corporations, most notably AT&T;, GM and Shell Oil, in the credit card business.

“This activity will continue to drive small bank card programs out of the market, and Banc One will continue to have an opportunity to look at a range of possible portfolio acquisitions during the next few years,” he wrote.

On Monday, McCoy said Banc One is interested in further acquisitions. “We want to be a national banking company,” he said.

Stock analyst Lawrence Vitale said the deal is a good one.

“They’re buying growth,” he said. “They saw the independents run away with the business and they’re trying to catch up.”

Banc One and First USA said they expect the all-stock deal to be completed by May 31.

Terms of the transaction call for First USA’s shareholders to receive 1.1659 shares of Banc One stock for each of their own shares.

First USA shares shot up 24% as the most active issue on the New York Stock Exchange, surging $8.875 to close at $45.625. Banc One fell $3.48, or 7.7%, to close at $41.64, the second-most active issue on the NYSE.

“Our combined strength will enable us to offer a broader range of financial services to our existing customer base,” said John C. Tolleson, First USA chairman and chief executive.

Banc One also reported that its fourth-quarter earnings rose nearly 10% in the final quarter of 1996, announced a 12% increase in its dividend and a repurchase of up to 12 million shares of its stock. It said it earned $369.8 million, or 85 cents a share, slightly above analysts’ expectations, compared with $336.8 million, or 77 cents a share, a year earlier.

First USA reported that fiscal second-quarter earnings rose 34% to $79.1 million, or 58 cents a share, in the quarter ended Dec. 31, up from $58.9 million, or 44 cents, a year earlier.

Banc One had assets of $101.8 billion as of year-end 1996. It operates 1,502 banking offices in 12 states.