MILWAUKEE (AP) _ Star Banc Corp. is buying Firstar Corp. for stock worth about $7.2 billion in a deal creating a banking company with $38 billion in assets and outlets in 10 states mostly in the Midwest.

Cincinnati-based Star Banc is taking Firstar's name as well as its headquarters in Milwaukee as part of the deal disclosed today. The consumer banking and specialized lending operations would be based in Cincinnati.

The combined company would have 720 branch locations in eight Midwest states and Arizona, as well as trust operations in Florida.

The agreement calls for Firstar shareholders to receive 0.76 shares of common stock of the combined company for each share of Firstar common stock, while Star Banc shareholders will retain one share of common stock in the combined company for each Star Banc share.

Based on Star Banc's closing stock price Tuesday, this represents a price of $48.55 for each Firstar share, a 27 percent premium.

Roger L. Fitzsimonds, chairman and chief executive of Firstar, is to become chairman of the new company, and Jerry A. Grundhofer, chairman, president and chief executive of Star Banc, is to become president and chief executive.

The board of directors is to include 18 representatives of Star Banc and 14 representatives of Firstar.

Star Banc and Firstar estimate that they will reduce their expenses by $174 million, with half of this saving in 1999 and the remainder in 2000.

The two companies don't overlap geographically, and expect bo branch closings as a result of the merger.

But the announcement said that some job reductions are expected, primarily in headquarters and administrative positions.

Star Banc, with assets of $14 billion and nearly 5,000 employees, has branches in Ohio, Kentucky and Indiana. It will expand into Tennessee in August when it completes a $696 million buyout of Trans Financial Inc., a Bowling Green, Ky., bank with $2.2 billion in assets.

Firstar has $20 billion in assets and branches in Wisconsin, Iowa, Illinois, Minnesota and Arizona, as well as operations in Florida. It employs about 7,800 people.

Firstar said in June it planned to acquire Cargill Leasing Corp., based in Minnetonka, Minn. The deal, subject to federal approval, was expected to close in the third quarter.