Merger Mania

In the last month or so, two mergers have taken place that have-or might have--implications for northwest Indiana.

In the first, announced in mid-October, Harris Bank (a subsidiary of BOM Ltd., of Canada) has sought to acquire Mercantile National Bank, the largest locally-owned bank in northwest Indiana. Harris has asstes of $51 billion, and BOM (formerly Bank of Montral) is a $256 billion bank and financial holding company. Mercantile has about $800 million in assets and will give Harris its first physical presence in northwest Indiana.

This is an important merger for northwest Indiana for a couple of reasons. First, many banks in n orthwest Indiana have remained independent of national bank holding companies. As a result, banks here have probably been more focused on local banking services. And the naking market has remained extremely competitive. This merger changes--or could change--all that. Harris (and BOM) have a larger agenda than serving northwest Indiana, and their operation of banks in the region is likely to reflect that. One consequence will be that there will be one less business voice speaking on behalf of the region, and one less business with a commitment to investments in the region.

Second, the purchase of Mercantile is likely to mean that other currently locally-owned banks will become takeover targets. If the consequence is that fewer banks in the region are locally owned, then (experience elsewhere tells us) medium and small firms here are likely to find access to credit more difficult.

The second merger, though, is the big one. ISPAT-Inland, a privately-owned international steel manufacturer, has reached agreement on acquiring the International Steel Grou (ISG), a company founded on the remains of LTV Steel (and enlarged through its purchase of Bethlehem Steel. The result will be the world's largest steel manufacturing company. The resulting company will be known as Mittal Steel. This merger is likely to have fewer immediate local consequences (especially if the world steel market remains strong). But if the merger results in cost savings and a stronger competitive position for Mittal Steel, one likely impact is that U.S. Steel might seek to make acquitions of its own. Or it might become a takeover target. Either way, larger companies with less local ownership and commitment will come into being. The result may well be, in the long-run, less stability and greater uncertainty for workers in and suppliers to the steel industry.

Although the importance in steel to the local economy has diminished greatly (it's now between 7% and 8% of local employment, donw over the last 25 years, from about a third), it's still the most important industry in terms of value of output and income generated. Greater uncertainty is not a good thing.