Bank Merger Fever : Wells Fargo, First Interstate Girding for a Showdown : Outlook: A new bid could come next week, a Wells source says. Both sides have put proxy solicitation specialists on the job.

A day after First Interstate Bancorp jilted Wells Fargo & Co. and agreed to be acquired by Minneapolis-based First Bank System Inc., the rival camps girded for a possible showdown before First Interstate’s shareholders.

Wells and First Interstate have added two of the nation’s top proxy solicitation specialists to their teams of lawyers, investment bankers and other advisers.

And in an apparent attempt to discourage its hostile suitor, First Interstate warned Wells that First Bank stands ready to match any competing bid, according to a person who was present during a conversation between senior officials of Wells and First Interstate.

Although Wells’ current offer is already richer than First Bank’s--about $10.6 billion, or $136.66 a share, compared to $10.2 billion, or $131.63 a share, at Tuesday’s closing stock prices--analysts said the next move is Wells’.

A Wells team member said a response is likely before the end of next week.

With First Interstate directors determined to push through the union with First Bank, Wells is at a disadvantage, but some experts watching the action said its chances of success should not be dismissed.

“It’s very early in the process,” said one professional who is involved in the struggle. “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.

First Interstate has engaged the proxy solicitation firm of Georgeson & Co., Hosoi said. Wells, according to sources, has lined up rival D.F. King & Co.

The job of the New York-based proxy advisers is akin to that of tacticians in a political campaign: to help make the case for their candidate and probe for weaknesses in their opponent’s arguments. The voters in this battle will be First Interstate shareholders, who must approve any merger. Proxies are the ballots used to cast votes in corporate elections.

Among the campaign issues will be whether a combined First Bank-First Interstate could achieve the $500 million in annual cost savings and sharp profit increases that the companies have projected.

“It’s hard to believe an 18% accretion in earnings in the first full year,” said analyst Linda Stromberg of M.R. Beal & Co.

With big institutions holding the bulk of First Interstate’s shares, the battle could be won by securing the votes of a relatively small group of stockholders. First Interstate’s largest shareholder is the New York leveraged-buyout firm Kohlberg, Kravis, Roberts & Co., with about 7.6% of the stock.

That firm normally makes no comment on its investments, but a spokeswoman said Tuesday that KKR “is supportive of the process that First Interstate is undertaking to enhance shareholder value.”

Another large holder, Oppenheimer Management Corp., with 360,000 shares, was cool to the First Bank deal. “The Wells-Interstate combination makes more sense,” Oppenheimer’s Robert Doll told Bloomberg Business News.

Since announcing the definitive merger agreement in New York early Monday, First Interstate Chairman William E.B. Siart has been holding face-to-face meetings with major stockholders.

Siart and First Bank Chairman John F. (Jack) Grundhofer will be trying to sell the deal to First Interstate’s employees--and its hometown--at an unusual rally scheduled this morning outside First Interstate’s headquarters. Mayor Richard Riordan, who welcomed the First Bank bid as a job saver, plans to attend.

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.

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Times staff writer James S. Granelli contributed to this report.