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Shawmut Ends Merger Talks With Bank of Boston

January 15, 1992

BOSTON (AP) _ Shawmut National Corp. said today it broke off merger talks with Bank of Boston Corp., ending months of negotiations that could have created the largest bank in economically troubled New England.

Analysts said the move was a further sign that the banking climate in New England is slowly recovering from a downward spiral that began with a recession in the late ’80s.

The finances of Shawmut, based in Hartford, Conn., have been improving and ″the interests of our shareholders will be best served by not pursuing a combination with Bank of Boston,″ said its chairman, Joel B. Alvord.

He said Shawmut would show a ″continuation of positive quarterly trends″ when it reports its fourth quarter and 1991 financial results next week.

Bank of Boston spokeswoman Constance Hubbell said Shawmut officials ″weren’t necessarily in agreement with all of our terms.″ She declined to elaborate.

Until recently, a merger appeared likely. Bank mergers have become a pattern in the industry, and both banks, burdened by real estate losses, would have been able to combine their strengths and cut overlapping costs.

However, analysts also said the merger would have exacted a heavy toll on Shawmut, which would have probably suffered the brunt of layoffs.

During much of the negotiations, it appeared Bank of Boston Chairman Ira Stepanian would succeed in gaining much of the day-to-day control of the combined operations.

James Moynihan, an analyst with Advest Inc., said that because both banks now ″appear to be in a much healthier position, they feel they can do it on their own.″

However, the failure of merger talks exposes them to acquisition efforts by banks outside the region, analysts said. Another possibility would be for big investors to infuse the banks with capital.

″I think both companies are healthy enough to stand alone,″ said David Berry, an analyst with Keefe, Bruyette & Woods in New York. ″But the question is not one of survival, but of competitive strengths.″

The merger breakdown leaves Fleet-Norstar Financial Group Inc., based in Providence, R.I., as the region’s largest banking company.

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