B of A Directors to Huddle; Takeover Rebuff Expected

BankAmerica’s directors will gather this weekend and are expected on Monday to formally reject First Interstate Bancorp’s $3.1-billion takeover proposal.

Chairman and Chief Executive A. W. Clausen is expected to urge directors to rebuff the bid as inadequate and to argue that the company can return to profitability on its own by this summer.

Sources close to BankAmerica have argued that its California-based Bank of America retail operations alone are worth more than what First Interstate is offering for the entire company.

In a New Year’s letter to BankAmerica employees this week, Clausen wrote: “My own position is clear. I have so far seen no compelling advantage in the proposed merger.”

Until now, BankAmerica’s board had refused to take a stand on First Interstate’s unsolicited overtures but had asked First Interstate to withdraw its proposal so that BankAmerica’s new management could formulate a strategic plan. First Interstate instead sought permission last month from the Federal Reserve Board to acquire BankAmerica in either a friendly or hostile transaction and filed papers with the Securities and Exchange Commission covering terms of its proposed offer of an exchange of securities.

BankAmerica’s formal rejection may be a prelude to a nasty fight for control that is likely to be fought in the courts, at regulatory agencies and in the press.

“If the board decides to reject the FIB offer, we will probably be in a fight. FIB has said--like it or not--that it will attempt a hostile takeover if the merger proposal is rejected,” Clausen wrote in the letter to employees.

“None of us seeks a fight, but if one is forced upon us, we will be found ready, willing and able.”