Norwest Will Buy Foothill Group in $441-Million Deal : Finance: The agreement unites L.A.-based commercial lender with the nation’s 13th-largest banking firm.

Los Angeles-based Foothill Group Inc., one of the nation’s largest independent commercial finance companies, has agreed to be acquired by Norwest Corp. of Minneapolis for about $441 million in Norwest stock, the firms announced Monday.

Analysts applauded the definitive agreement as a plus for both companies, helping Norwest, America’s 13th-largest banking company, to diversify its business lending and giving Foothill a cheaper source of capital.

Among stockholders, one potential winner is the San Francisco money-management firm of Richard C. Blum & Associates, which bought its 130,000-share stake in Foothill about six months ago, Blum said in a telephone interview Monday.

Another connection between Blum and Foothill is that Foothill Chairman Don L. Gevirtz, an active Democrat, helped finance last year’s successful reelection campaign by Blum’s wife, U.S. Sen. Dianne Feinstein. Blum said he has known Gevirtz for 25 years and that he introduced Gevirtz to Feinstein.

Under the agreement, expected to close later this year, each share of Foothill common stock will be exchanged for 0.92 of a Norwest common share, and each share of Foothill preferred stock will be exchanged for 6.13 Norwest common shares.

Based on Norwest’s closing price of $28.125 in Monday trading on the New York Stock Exchange, Foothill common shares are valued at $25.875 each. Foothill closed Monday at $23.875 on the NYSE, up 50 cents. The deal was announced after the market closed.

Although Foothill Group is considered one of the premier players in its specialized field of lending to small- and medium-size companies with poor credit quality, analysts said it has lately run into ferocious price competition from big commercial banks that can tap into their deposit bases for low-cost funds.

By teaming with Norwest, which has $61.8 billion in assets, Foothill Group can instantly raise money more cheaply by piggy-backing on the big bank’s superior credit rating.

“It’s a real huge funding advantage for Foothill,” said Reilly Tierney, analyst for Duff & Phelps credit rating agency in Chicago.

For Norwest, the deal more than doubles the size of its operations in asset-based lending and other forms of commercial finance that, while riskier, carry fatter profit margins than conventional lending.

The firm’s Norwest Business Credit asset-based lending unit had $507 million in assets as of March 31, whereas Foothill had finance receivables of $745 million.

“A merger with Norwest, one of the nation’s strongest, most diversified financial services companies, will help assure our continued earnings growth by expanding our access to the capital markets and lowering our cost of funds,” according to a statement from Gevirtz and John F. Nickoll, president and co-chief executive of Foothill.

Added Jim Campbell, a Norwest executive vice president: “Foothill’s 25 years of success in asset-based lending, the outstanding performance of its money-management business, its talented management team and conservative financial position make it an ideal partner for Norwest and will further diversify our nationwide specialized lending businesses, which account for approximately 14% of Norwest Corp.’s net income.”

Norwest and Foothill, in a joint statement, said that Foothill and its money-management unit, Foothill Capital, will continue to operate under their own names as Norwest subsidiaries and will remain at Foothill’s West Los Angeles headquarters.

One of the keys to the deal for both companies was keeping Foothill’s highly regarded managers and lenders in place.

“If Foothill felt in the slightest that this would change their culture, they wouldn’t have done the deal,” said Michael Corasiniti, an analyst for Alex. Brown & Sons in New York.