Washington Mutual to Buy Bank United

Updated from 9:39 a.m. EDT

In a deal that will significantly expand its presence in Texas, Washington Mutual (WM Quote), the nation's largest savings and loan firm, agreed to buy Bank United (BNKU Quote) in a stock deal valued at $1.5 billion, the companies said Monday.

Under the terms of the deal, each share of Bank United common stock will be converted to 1.3 shares of Washington Mutual common stock. Based on Friday's closing prices, the deal values Bank United at $42.66 per share, or almost no premium to its Friday close of 42 3/8. Shares of Washington Mutual closed Friday at 32 13/16.

Bank United finished Monday regular trading down 1 1/2, or 4%, at 40 7/8, while Washington Mutual ended down 3/4, or 2%, at 32 1/16.

The deal price is 11.6 times Bank United's trailing 12-month earnings, and 1.67 times the company's book value as of June 30.

The deal will give Washington Mutual a $10.7 billion deposit banking business in Texas, and make it the top bank in three of the four largest metropolitan markets in the state.

"It's a logical extension of our strategy to become the leading consumer bank in the nation's most attractive geographic markets," said Kerry Killinger, Washington Mutual's chairman and chief executive officer, in a statement. Seattle-based Washington Mutual also has a significant presence in the Pacific Northwest, California and Florida.

Houston-based Bank United's stock has sagged, creating speculation that the company would be sold.

Both boards of directors have approved the deal, which is expected to close at the end of this year or early in 2001.

Washington Mutual has about $186 billion in assets, while Bank United has $18 billion. Once completed, the deal is expected to result in about $87 million in annual savings, mainly from consolidating administrative operations, the companies said.