Bancorp to a new level of public prominence, the bank Wednesday convened its top executives, the mayor of Los Angeles, and hundreds of employees in an outdoor rally in support of its merger agreement with First Bank System Inc. The crowd - estimated at 700 - cheered loudly and waved signs with such as messages as "Thanks, Bill and Jack." That referred to William E.B. Siart, chairman of First Interstate, and John F. Grundhofer, chairman of First Bank. Even as the celebration unfolded, however, Wells Fargo & Co. prepared to escalate its battle for control of First Interstate. Wells, spurned in an unsolicited offer for First Interstate, hired the New York-based proxy solicitation firm D.F. King & Co. to take its case to First Interstate shareholders. The rally, held in front of the city's historic central library, underscored the unusually strong political flavor of the takeover battle. Supporters of the First Bank deal have been arguing forcefully that the transaction would result in far few job losses in California than the Wells proposal. "Jack and Bill, we love you, and we look forward to working with you for many, many years to come," said Los Angeles Mayor Richard J. Riordan, who had criticized the Wells plan. "I think this rally shows that people think it's a good deal," Mr. Grundhofer declared. The event served to introduce First Interstate's employees to Mr. Grundhofer, a Los Angeles native, who would be chairman and chief executive of the post-merger bank. The boards of both Minneapolis-based First Bank and Los Angeles-based First Interstate have approved the merger, and Mr. Grundhofer said he expects approval from shareholders within four to six months. The merged bank would retain the First Interstate name, but be headquartered in First Banks head office in Minneapolis. The name of Wells Fargo was never mentioned publicly by the officials who spoke at the rally. But it was clearly on the minds of the employees who attended the event, which was held in the shadows of a major Wells building. By holding a rally in which employees and political leaders were demonstratively supportive of the First Bank merger, First Interstate appeared to be sending a message about the deal: First Interstate employees - and the political leadership of Southern California - greatly prefer it to a merger with San Francisco-based Wells Fargo. Specifically, the executives have said that 6,080 jobs would be lost, for about half the $500 million of cost savings expected with the merger. The job losses would be spread throughout the combined banks' 21-state territory, and would be focused primarily in back-office and data processing centers that aren't even located in California. No California branches would be closed, since First Bank doesn't operate in the state. By contrast, Wells Fargo has said that its merger would result in cost cuts of $800 million. The bank has not estimated job losses, but analysts have pegged the figure at between 7,000 and 9,000. It is expected that the majority of those job-losses would be in California, since this is the only state in which Wells operates a retail network. Like Mr. Riordan, the mayor of San Francisco, Frank Jordan, has indicated support for the First Bank merger. All of which comes with some irony. At the rally, Mr. Riordan was ebullient in his praise of the deal, and of Mr. Grundhofer, an infamous cost-cutter at First Bank who has been referred to as "Jack the Ripper" for the 2,000 jobs he cut at First Bank after taking over the helm there in 1990. Mr. Riordan led the assembled employees in cheers for First Interstate chairman William E. B. Siart, who would be president of the merged bank, and also in cheers for the First Interstate board. He said the merger was good for jobs in California, good for customers of the bank, since there would be more competition between banks in the state, and also good for charities in Los Angeles, to which Mr. Riordan said First Interstate was very generous. Mr. Siart asserted that the merger would create the "premier banking powerhouse and marketing powerhouse in the U.S.," and urged the assembled employees to "go out and get every piece of business we can." Employees chanted, "Two, four, six, eight, who do we appreciate, Jack and Bill, Jack and Bill."
Observers said such shows of support can have a powerful influence on the attractiveness of a deal. "I think it's smart of Siart" to hold a rally, said Robert H. Smith, the former chairman of Security Pacific, who left commercial banking shortly after Security Pacific was acquired by BankAmerica Corp. in 1992. But many observers added that the fact that Wells Fargo has retained a proxy solicitation firm means that it is very likely to go forward with a hostile bid. "The implication is that Wells must feel the board is intransigent, and the only way they are going to get their bid approved is to force some sort of shareholder vote," said John P. C. Duncan, an attorney in Jones, Day Reavis & Pogue's Chicago office.