By Jonathan Stempel

NEW YORK (Reuters) - Bank of America Corp.'s (BAC.N: Quote, Profile, Research) agreement to buy ABN AMRO Holding NV's AAH.AS LaSalle Bank Corp. unit for $21 billion is a pricey bet that it can energise a franchise operating in Chicago, one of the hottest U.S. banking markets, and in Michigan, one of the weakest.

The all-cash purchase would fill a hole in Bank of America's 5,737-branch network -- by far the nation's largest -- and make it Chicago's largest bank. It would also give Bank of America its first branches in Michigan, a state ravaged by contraction of a once-dominant auto industry.

"It's a full price," said Chris Hagedorn, who helps invest more than $20 billion at Fifth Third Asset Management in Cincinnati. "It's hard to say they (Bank of America) really wanted to be in Michigan on their own. The key take-away is the desire to be in Chicago in a bigger way."

LaSalle has 411 branches, 1,500 automated teller machines, 1.4 million retail and 17,000 commercial customers, and $113 billion of assets. Its branch network includes 141 in the Chicago area, 264 in Michigan and six in Indiana.

The purchase was announced as ABN AMRO, a Dutch bank, agreed to be acquired by Britain's Barclays Plc (BARC.L: Quote, Profile, Research) for 67 billion euros ($91 billion).

Chief Executive Kenneth Lewis has long eyed expansion in Chicago, where Bank of America has 56 branches.

"The opportunity arose, and we have acted," Lewis said on a conference call. He said the bank plans no more acquisitions "of any size whatsoever through 2008."

Bank of America said its net cost for LaSalle would be $16 billion, after a return of excess capital. It estimated the price at 21.3 times expected 2007 earnings, above a 16.3 multiple on comparable acquisitions, and 2.2 times book value.