wlm4 at cornell.edu
10-19-1995, 06:55 AM
LOS ANGELES (Reuter) - Wells Fargo & Co. Wednesday proposed a $10 billion
merger with First Interstate Bancorp, a combination that would create the
nation's eighth-largest bank, but First Interstate immediately called the
offer unwelcome.
First Interstate Chairman William Siart stopped short of rejecting the
offer outright, saying he was ``deeply disappointed that Wells Fargo would
take this uninvited action.'' But he also acknowledged First Interstate had
been exploring strategic alternatives, ``of which Walls Fargo is one.''
The offer was the latest in a series of merger announcements sweeping the
nation's banking industry. Big banks, plagued by slow growth and earnings
worries, are seeking a quick way to expand -- buying other banks.
The announcement sparked a rally in bank stocks, with the Standard and
Poor's bank index rising 1.6 percent, or 5.3 points to 339.9, outpacing
other market indexes.
Chase Manhattan Corp. and Chemical Banking Corp. in August agreed to a $10
billion merger that would create the nation's largest bank, with nearly
$300 billion in assets.
``I think there is a 95 percent chance this will happen,'' said banking
analyst George Salem at Gerard Klauer Mattison in New York. ``Interstate
does not have a viable alternative to create stockholder value anywhere
near what's happening here.''
Under the proposal, First Interstate shareholders would receive 0.625 of a
Wells Fargo share for each share of First Interstate. At Tuesday's closing
price of Wells Fargo's stock, the exchange ratio represents a price of
$133.50 for each First Interstate share, Wells Fargo said in a statement.
That represents a 26 percent premium over Tuesday's $106 closing price of
First Interstate on the New York Stock Exchange, and the stock jumped $34
to $140 Wednesday.
With shares of both companies on the rise, analysts said Wells Fargo will
not have to raise its bid by much to reach a deal.
``The value comes from the exchange ratio itself, as well as the increase
in the price of Wells that is occurring as a result of the deal,'' Salem
said.
The stocks of both banks have been surging in recent weeks as rumours
circulated that a takeover or merger might be imminent. Wells Fargo's
shares jumped $14.50 to $228.125 Wednedsay, also on the NYSE. At that
price, each share of First Interestate would be worth about $143.
``We think the economics of this proposal are clear and overwhelming and
should quickly lead to discussions among both parties,'' Wells Fargo
Chairman Paul Hazen said in a teleconference with analysts.
``There have been discussions from time to time...and as late as last
evening, I talked with Bill Siart who believes it is in First Interstate's
best interest to take six months or longer to consider some of its options,
which include taking us as a partner,'' Hazen said at a news briefing.
Siart said First Interstate's board ``will consider Wells Fargo's proposal
and respond when appropriate.''
First Interstate, with assets of $56 billion and 1,133 offices in 13
western states, is the nation's 14th largest bank. Wells Fargo, with assets
of $51 billion and 861 outlets in California, is currently No. 17.
A merger of the two would create the nation's eighth largest bank, if
other pending mergers are completed. But the combined bank would still be
only half the size of California's largest bank, BankAmerica Corp., which
has $227 billion in assets.
Speculation that BankAmerica might make a competing bid for First
Interstate was dashed by BankAmerica chief financial officer Lewis Coleman,
who said in a conference call with reporters that BankAmerica was
interested only in acquiring small banks that filled gaps in its franchise.
``We are convinced that the state of California will benefit by having two
of the country's major banks headquartered in the state,'' Hazen said.
Wells Fargo said the combined banks could realise cost savings of $700
million a year and lead to an unspecified number of job cuts.
Other bank stocks that rose included Wachovia Corp., up $1.125 to $46.50;
Barnett Bank, up $1.25 to $59.625; Mellon Bank, up $1.50 to $53.50; and
SunTrust Banks, up $1.625 at $68.50, all the NYSE.
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merger with First Interstate Bancorp, a combination that would create the
nation's eighth-largest bank, but First Interstate immediately called the
offer unwelcome.
First Interstate Chairman William Siart stopped short of rejecting the
offer outright, saying he was ``deeply disappointed that Wells Fargo would
take this uninvited action.'' But he also acknowledged First Interstate had
been exploring strategic alternatives, ``of which Walls Fargo is one.''
The offer was the latest in a series of merger announcements sweeping the
nation's banking industry. Big banks, plagued by slow growth and earnings
worries, are seeking a quick way to expand -- buying other banks.
The announcement sparked a rally in bank stocks, with the Standard and
Poor's bank index rising 1.6 percent, or 5.3 points to 339.9, outpacing
other market indexes.
Chase Manhattan Corp. and Chemical Banking Corp. in August agreed to a $10
billion merger that would create the nation's largest bank, with nearly
$300 billion in assets.
``I think there is a 95 percent chance this will happen,'' said banking
analyst George Salem at Gerard Klauer Mattison in New York. ``Interstate
does not have a viable alternative to create stockholder value anywhere
near what's happening here.''
Under the proposal, First Interstate shareholders would receive 0.625 of a
Wells Fargo share for each share of First Interstate. At Tuesday's closing
price of Wells Fargo's stock, the exchange ratio represents a price of
$133.50 for each First Interstate share, Wells Fargo said in a statement.
That represents a 26 percent premium over Tuesday's $106 closing price of
First Interstate on the New York Stock Exchange, and the stock jumped $34
to $140 Wednesday.
With shares of both companies on the rise, analysts said Wells Fargo will
not have to raise its bid by much to reach a deal.
``The value comes from the exchange ratio itself, as well as the increase
in the price of Wells that is occurring as a result of the deal,'' Salem
said.
The stocks of both banks have been surging in recent weeks as rumours
circulated that a takeover or merger might be imminent. Wells Fargo's
shares jumped $14.50 to $228.125 Wednedsay, also on the NYSE. At that
price, each share of First Interestate would be worth about $143.
``We think the economics of this proposal are clear and overwhelming and
should quickly lead to discussions among both parties,'' Wells Fargo
Chairman Paul Hazen said in a teleconference with analysts.
``There have been discussions from time to time...and as late as last
evening, I talked with Bill Siart who believes it is in First Interstate's
best interest to take six months or longer to consider some of its options,
which include taking us as a partner,'' Hazen said at a news briefing.
Siart said First Interstate's board ``will consider Wells Fargo's proposal
and respond when appropriate.''
First Interstate, with assets of $56 billion and 1,133 offices in 13
western states, is the nation's 14th largest bank. Wells Fargo, with assets
of $51 billion and 861 outlets in California, is currently No. 17.
A merger of the two would create the nation's eighth largest bank, if
other pending mergers are completed. But the combined bank would still be
only half the size of California's largest bank, BankAmerica Corp., which
has $227 billion in assets.
Speculation that BankAmerica might make a competing bid for First
Interstate was dashed by BankAmerica chief financial officer Lewis Coleman,
who said in a conference call with reporters that BankAmerica was
interested only in acquiring small banks that filled gaps in its franchise.
``We are convinced that the state of California will benefit by having two
of the country's major banks headquartered in the state,'' Hazen said.
Wells Fargo said the combined banks could realise cost savings of $700
million a year and lead to an unspecified number of job cuts.
Other bank stocks that rose included Wachovia Corp., up $1.125 to $46.50;
Barnett Bank, up $1.25 to $59.625; Mellon Bank, up $1.50 to $53.50; and
SunTrust Banks, up $1.625 at $68.50, all the NYSE.
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