Stocks: 1st Union Soars After $2.5B Offering

First Union Corp.'s shares surged almost 5% on Friday after investors piled into the North Carolina banking company's huge offering of stock.

First Union came to market Thursday evening with 52.2 million shares, worth an estimated $2.5 billion.

Most the shares-44.7 million-were owned by Banco Santander, Spain's largest banking company, which recently decided to sell its stake in First Union to bolster its capital position.

The Madrid bank, which acquired its stake when First Union bought New Jersey's First Fidelity Bancorp., said it received $2.131 billion in net proceeds from the transaction and will record a $1.307 billion capital gain from the stock sale.

The remaining 7.5 million shares were offered by First Union to account for its pending acquisition of Virginia's Signet Banking Corp. as a pooling of interest.

First Union's shares jumped $2.125 on ten times normal volume, to $50.50, on a day when banking stocks in general were surging.

Volume among bank stock issues in general was also substantial as a result of "triple witching"-a time when options expire.

The Standard & Poor's bank index rose 0.24%, while the Dow Jones industrial average fell 0.07%.

The Nasdaq bank index rose 0.03%. The Standard & Poor's 500 stock index was up 0.34%.

First Union and Banco Santander's offering was underwritten by a syndicate of brokerage firms, led by Morgan Stanley Dean Witter.

Market experts noted that the issue was heavily oversubscribed. Officials at First Union said the deal had been oversold by 2 to 1.

The rarity of such offerings by banks no doubt accounted for a significant part of Friday's interest. Moreover, some investment bankers said the First Union deal may rank as the largest equity offering of its kind. First Union management spent two weeks on a "road show" in New York City and elsewhere promoting the issue.

Banking industry analysts were unsurprised by the heavy turnout.

Veteran analyst Frank J. Barkocy of Josephthal Lyon & Ross Inc., New York, said that the heavy interest and participation in the deal reflects the market's support of First Union's strategies.

"There was a time when First Union did a string of acquisitions which the market thought was too much too soon," said Mr. Barkocy. "But they have been successful in their recent acquisitions. The feeling is that they really know what they are doing."

He added that the First Union's stock is still undervalued on a price- to-earnings basis in contrast to its peers.

"There was likely some catch-up in the price of the stock," he said of Friday's activity.

Nancy A. Bush, associate research director at Brown Brothers, Harriman & Co., said, "regional bank stock investors know that if you are going to invest, you are going to have to invest in the big acquiring companies.".

"In spite of the fact that First Union did an expensive deal (with Signet), investors are saying that their strategies have worked."

Meanwhile Credit Suisse First Boston Corp. removed Bankers Trust New York Corp. from its "focus" list of recommended stocks, citing the substantial surge in the bank's shares last week.

Regional bank analyst Bradley G. Ball told clients to "take some profits," noting that Bankers Trust shares have been up 43% this quarter, while the S&P 500 index has been up only 7%.

Mr. Ball is still bullish on the company, and CS First Boston continues to recommend the stock at a "strong buy."

Bankers Trust shares, which had endured a wild ride Thursday on takeover rumors, rose 25 cents, to $123.75.

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