company's $10 billion agreement to sell out to First Bank System Inc., analysts and others said Tuesday. "I have talked to nearly all the major First Interstate shareholders, and the reaction ranged from mildly negative to outright hostile," said Thomas Brown, a bank analyst with Donaldson, Lufkin & Jenrette Inc. "I give the deal a 1-in-4 chance of succeeding." Some investors were openly rooting for an earlier, unsolicited bid by Wells Fargo & Co. First Bank made its offer on Monday, setting the stage for what looms as one of the industry's most heated bidding battles. Hoping to head off opposition, the chief executives of First Interstate and First Bank System flew to New York and Boston on Tuesday to meet with major investors. The executives, John Grundhofer of First Bank and William Siart of First Interstate, met separately in Boston with officials of Fidelity Management & Research, an arm of the influential mutual fund company that owns roughly 100,000 shares of First Interstate stock and 259,000 shares of First Bank System. Several major investors - including Fidelity and Kohlberg Kravis Roberts & Co., First Interstate's largest shareholder - declined to comment. But others made their leanings clear. "We would prefer to have Wells Fargo stock," said Scott Edgar, an analyst with SIFE Trust Fund, which owns 135,000 First Interstate shares. In other developments in the bidding battle: *First Bank and First Interstate detailed plans for cutting $193 million in annual data processing and operations costs by eliminating redundant operations. This figure is about 40% of the total projected savings from the proposed merger. (See story on page 16). *First Interstate said chief operating officer William Randall, would lose his job under the merger and plans to retire. *Reports surfaced that Wells had hired a proxy solicitation firm to gauge investor support for a higher bid. At Tuesday's closing price, the First Bank offer was worth $131.625 per share, and Wells' original offer was worth $131.40 per share. If Wells were to increase its exchange ratio to 0.65 of its shares for each Interstate share, as promised, the price would be $136.66 per share. "It looks to us like Interstate's investors prefer the Wells Fargo offer to the First Bank offer," said George Salem, a bank analyst with Gerard Klauer & Mattison. "Any stockholder vote taken could very well go against Interstate's management." Unless Wells lobs in a much higher offer, much of the debate is likely to focus on the value of its stock versus that of First Bank. Both are high performers. However, a source who advises some large institutional investors said First Bank System may be getting a bad rap. People have to look at First Bank System's record, he said. If an investor is going to keep stock, as opposed to cashing out, he added, than it is not clear First Bank System is such a bad deal. First Interstate confirmed Mr. Randall, and chief operating officer, would leave the bank. Mr. Randall, a 26-year First Interstate veteran, was promoted to his current post of chief operating officer and executive vice president in January, when Mr. Siart was named chief executive. Mr. Siart has since added the title of chairman. Mr. Randall, 55, had been seen as a potential rival to Mr. Siart for the top job. But now he plans to retire upon completion of the proposed merger with First Bank System, bank officials said. Mr. Siart added that Mr. Randall was not present at the directors meeting because losing his job presented a conflict of interest that kept him from voting. Mr. Randall would lose his job because the position he is most qualified for - chief financial officer - is to go to Richard Zona, who holds that title at First Bank System, Mr. Siart said. He asserted that Mr. Randall supported the merger, but said the executive was not available for comment. He said the deal was approved by a 13-0 vote, with two abstentions. Also absent from the vote was Dr. Jewel Plummer Cobb, the 71-year old president emerita of California State University, Fullerton. The director told American Banker she supported the merger. Barton Crockett contributed to this story.
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