Ujb Financial: The Prize Catches Being Eyed By Big Banks

Merger fever has taken hold of bankers. Hoping to grab market share, large banks are shopping among their smaller brethren. Several thousand of the nation's 11,806 commercial banks could be swallowed up in the coming consolidation. True, potential buyers are moving slowly. Lower interest rates and stronger earnings have boosted the value of even weaker banks. But patient investors can still find attractive buyout candidates. The following banks are among those whose stocks generate the most takeover talk.

UJB FINANCIAL: FLUSH IN THE JERSEY SUBURBS

If Neil J. Weisman had his way, UJB Financial Corp. in Princeton, N.J., would be history. The dissident shareholder makes a blunt prediction about the likelihood of a takeover of the $13.6 billion bank: "This year's annual meeting was the company's last."

Many analysts on Wall Street have begun to think like Weisman, who recently led an unsuccessful proxy battle against UJB to promote a buyout and whose firm, Chilmark Capital Corp., owns nearly 10% of the bank's stock. The state's third-largest bank holding company, UJB has an enviable franchise of 265 branches in affluent suburbs stretching from central Jersey to eastern Philadelphia.

While UJB has been battered by the depressed real estate market and the weak economy, analysts say it is now on the mend. Second-quarter earnings were up more than 150% from a year ago, to 21 cents a share. Analysts estimate the full year's earnings will be over $1, more than double 1991's 45 cents. Although UJB's return on equity of 4.94% is well below its peers, it's still much improved from the 1.79% that UJB reported a year ago.

BIG BATTLE. Weisman's high-profile proxy battle has already sent UJB's stock rocketing. At 18 3/4, it's up almost 30% from the start of the year. But the stock is trading at about 110% of book value, well below the 156% of book value that the top 50 regional banks average. Analysts estimate that a buyout offer could drive the share price to 25 or 30.

Analysts cite an impressive list of possible suitors who view UJB as an entree into the lucrative New Jersey market. They include heavy hitters such as Philadelphia-based CoreStates Financial, First Fidelity of Newark, N.J., and Bank of New York. Pittsburgh's PNC Financial Corp. and Mellon Bank Corp. are also possible buyers.

The UJB board has said it would consider any offer "that was at all attractive." But Chief Executive T. Joseph Semrod, who declined to comment, has told shareholders in the past that it's the wrong time to be selling. "The sense is that they want to hunker down and fix the thing on their own," says John A. Heffern, an analyst with Baltimore-based Alex. Brown & Sons Inc. The likelihood is that UJB won't have the chance.

TEN TOP BANK
      TAKEOVER CANDIDATES
                                                Price-
                             Assets    Share  earnings
      Company                Billions price*  ratio**
      MNC FINANCIAL           $17.0     11 1/4     --
      Baltimore
      Expected to post 1992 operating loss but has good franchise in attractive market
      UJB FINANCIAL           $13.2     18 3/4    17.5
      Princeton, N.J.
      Has been embroiled in protracted dispute with dissident shareholders pressing 
      for a buyout
      HUNTINGTON               12.0     23 3/4    11.7
      BANCSHARES
      Columbus, Ohio
      Solid, profitable bank that could be gobbled up by bigger rivals Banc One and 
      National City
      BAYBANKS                  9.3     36 1/4    22.9
      Boston
      An excellent consumer franchise in a rapidly consolidating region
      OLD KENT FINANCIAL        8.7     41 1/8    10.7
      Grand Rapids, Mich.
      Well-managed regional with good earnings is a possible target for expanding 
      Detroit banks such as Comerica
      MARSHALL & ILSLEY         7.3     59 5/8    11.9
      Milwaukee
      Located in a state with a robust economy and little out-of-state bank presence
      WEST ONE BANCORP          5.3     41        10.8
      Boise
      After making acquisitions in Washington, Oregon, and Utah, this bank is itself 
      an attractive target
      BANK SOUTH                4.4     10 3/4    51.2
      Atlanta
      Largest independent bank in Atlanta. Could lure buyout interest from 
      Southeastern regionals
      COLORADO NATIONAL         3.2     33 1/4    20.5
      BANKSHARES
      Denver
      The biggest independent remaining in Colorado, a sought-after market
      CULLEN/FROST BANKERS      3.0     28 1/2    20.6
      San Antonio
      The only large thriving independent left in the highly concentrated Texas market
      *July 15, 1992 **Based on average projected 1992
      earnings
      DATA: BW SURVEY OF ANALYSTS AND FUND MANAGERS; ZACH'S INVESTMENT RESEARCH INC.
      
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