Bank Merger Mania : First Interstate Could Be Popping Corks Too Soon : Outlook: Some analysts say today’s celebration of a rival merger will be premature if shareholders stand with Wells bid.
As First Interstate Bancorp laid plans Tuesday for an employee rally in Downtown Los Angeles this morning to celebrate its proposed merger with First Bank System Inc., there was some question whether the applause might be premature.
Wells Fargo & Co., First Interstate’s jilted suitor, is expected to try to break up the wedding, and some experts watching the action said its chances of success should not be dismissed.
“It’s very early in the process,” said one adviser who is involved in the faceoff. “The closest sports analogy is to pro basketball, where the games always seem to get decided in the fourth quarter.”
Even First Interstate acknowledged Tuesday that Wells has a head start in trying to persuade First Interstate shareholders of the merits of its bid, announced Oct. 18.
“Wells has been out in the marketplace the last three weeks trying to sell their deal, while we have just started our meetings with shareholders,” said Shirley T. Hosoi, chief spokeswoman for First Interstate.
Anticipating a showdown vote of the stockholders, both sides have added proxy solicitation specialists to their teams of lawyers, investment bankers and other advisers. First Interstate has engaged Georgeson & Co., Hosoi said. Wells, according to a source, has lined up the firm D.F. King.
In a move that evidently stunned Wells executives, First Interstate announced early Monday that it had signed a definitive agreement to be acquired by Minneapolis-based First Bank in a deal valued at $10.2 billion, or $131.63 a share, at First Bank’s closing stock price Tuesday.
Wells Chairman Paul Hazen quickly released a statement critical of the bid, saying it “does not serve the best interests of First Interstate’s shareholders.”
Wells executives were surprised because they thought a face-to-face meeting Nov. 1 between Hazen and First Interstate Chairman William E.B. Siart had gone well, sources told The Times, and they were convinced of the superiority of their deal over any foreseeable alternative.
Some analysts are in Wells’ corner on that point, doubting that First Bank will be able to achieve the $500 million in annual cost savings and sharp increase in earnings projected under its bid.
“It’s hard to believe an 18% accretion in earnings in the first full year,” said analyst Linda Stromberg of M.R. Beal & Co. “I’m a big believer that the Wells deal would have been a lot better.”
“There’s a lot of question whether the cost saves are there,” added an investment banker who is watching the developments closely.
The First Interstate shareholders are the ones whose opinions count, however, and while there is some indication of dissatisfaction with the First Bank bid, Siart and his top investor relations officer, Christine McCarthy, were pounding the pavement in New York on Monday and Tuesday trying to dispel the doubts.
Siart and First Bank Chairman John F. (Jack) Grundhofer will be trying to sell the deal to First Interstate’s employees and hometown at this morning’s rally outside First Interstate’s headquarters. Mayor Richard Riordan, who welcomed the First Bank bid as a job saver, also plans to attend. About 2,000 employees have been invited.
First Interstate’s stock has stayed within a few dollars of the offering price, which analysts said means investors expect the bidding to rise.
First Interstate’s stock added 50 cents to close at $127.375, First Bank gained 75 cents to $50.625, and Wells Fargo slipped 37.5 cents to $210.25 in trading on the New York Stock Exchange.