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25 May 2006 By Rob Cox Follow @rob1cox

AmSouth s $10bn merger with Regions illustrates how consolidation in US banking sector can continue given the environment. With synergies worth $2.5bn, a deal made sense. But AmSouth s valuation at three times book meant Regions couldn t justify paying a premium.

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Regions Financial and AmSouth Bancorp unveiled a nilpremium stock merger worth $10bn.

Regions will exchange 0.7974 of its shares for every AmSouth share. That values AmSouth at $28.33 based on Wednesday's close. AmSouth closed at $28.90. As part of the deal, AmSouth will pay a dividend of 35 cents to shareholders before it closes.

The companies said they expect to extract $400m of pretax cost savings, including $150m next year and the rest in 2008. They expect to incur $700m of restructuring costs.

Goldman Sachs and Sullivan & Cromwell advised AmSouth. Regions was advised by Merrill Lynch, Morgan Keegan and Wachtell, Lipton.

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