In Business This Week: HEADLINER
JOHN McCOY: THE REAL HUNGRY McCOY
Banc One's empire-building chairman is at it again. On Oct. 20, John McCoy announced a $3 billion stock swap to reel in New Orleans-based First Commerce, with $9.3 billion in assets.
The First Commerce buy is an unusually large one for McCoy. He has snapped up over 60 banks in the past decade, but many of them had fewer than $1 billion in assets. Indeed, McCoy has sat out much of the current wave of bank mergers. "There are certain prices for banks that we won't go over," he says. But he wanted First Commerce to get a big chunk of the lucrative New Orleans market, says Sandra Flannigan, a regional bank analyst at Merrill Lynch. The deal also gives him a staging area for any further forays in the South.
McCoy has been adding to other parts of his kingdom of late. In June, he bought First USA, the nation's fourth-largest issuer of Visa and MasterCard credit cards, for $9 billion. So Banc One seems to be in a buying mood again. But this time around, McCoy is carrying a big stick.EDITED BY KELLEY HOLLAND By Peter GaluszkaReturn to top
A JUMBO JOLT AT BOEING
BOEING SAW CLOUDS ON THE horizon but didn't expect so much turbulence. On Oct. 3, the jetmaker had warned snafus would require it to halt production on 747 jumbos and its newest 737s. Even so, investors were shocked on Oct. 22 when Boeing said it would take a $1.6 billion pretax charge and report a third-quarter loss. Boeing shares fell 7.6% on the news, to 497/8. The culprit: parts shortages and labor problems spawned by the massive production ramp-up to handle record orders. Nicholas Heymann of Prudential Securities expects a $501 million deficit for the quarter and 1997 profits of $1.1 billion, down from his earlier estimate of $2.1 billion. He says 1998 profits could also take a billion-dollar hit.EDITED BY KELLEY HOLLANDReturn to top
FIDELITY SETTLES ITS FRAUD SUIT
FIDELITY INVESTMENTS ENDED one of the most serious lawsuits ever to face the mutual-fund industry on Oct. 21 by agreeing to pay $10 million to settle a fraud case against Jeffrey Vinik. At issue: whether the former Magellan fund manager intentionally misled investors in Micron Technology when he made public statements in late 1995 saying he liked the stock while he secretly sold shares. Some attorneys say similar suits could follow. But Stuart H. Savett, a plaintiff's attorney in the case, says that is unlikely since few fund managers can move stocks with public comments.EDITED BY KELLEY HOLLANDReturn to top
CITI SHARPENS THE AX
AFTER LONG WARNING THAT cost cuts were ahead, Citicorp said on Oct. 21 it would order layoffs that would cut 7,500 jobs. Citi will take an $889 million charge. Third-quarter net income of $1.1 billion was up 14% from 1996, down 45% after the charge. Still, Wall Street loved the plan. "What investors are looking for is strong expense controls," says Stanley August, managing director of financial services research at First Union. Says a major stockholder: "Citi has revenue growth most banks dream of, but they have had expense growth that no banks would envy."EDITED BY KELLEY HOLLANDReturn to top