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Battle for Wachovia: One-Day Wonder: N.C. Gov Signs 1st Union’s Law

June 15, 2001, 1:00 a.m. EDT 4 Min Read

RALEIGH, N.C. — Sympathetic North Carolina officials did their part Thursday to help First Union Corp. preserve its planned purchase of Wachovia Corp. by adopting legislation that blocks a key advance by SunTrust Banks Inc., which also wants to buy Wachovia.

Gov. Mike Easley signed into law a securities reform bill that includes a last-minute amendment eliminating the right of a minority group of shareholders in a corporation to call a special shareholders meeting. SunTrust of Atlanta had proposed a change in Wachovia’s bylaws that would have allowed it to take advantage of the old law.

The legislation, overwhelmingly approved in both houses of the North Carolina General Assembly, takes effect immediately. Gov. Easley signed the bill after the North Carolina Senate approved it 45-to-1 earlier Thursday. The North Carolina House of Representatives had passed the bill 111-to-1 on Wednesday.

First Union’s legislative maneuvering is the latest twist in a month-long merger battle that began May 14, when SunTrust announced an unsolicited stock offer for Wachovia that was worth $14.7 billion at the time. Wachovia’s board later rejected the offer and said SunTrust was a poor fit and did not offer the long-term growth prospects of a merger with First Union.

SunTrust, long considered the most likely merger partner for Wachovia, has persisted, and now it is trying to persuade shareholders of the Winston-Salem-based company to reject the $13.4 billion purchase agreement that First Union and Wachovia signed on April 15.

First Union’s amendments to the North Carolina bill were introduced Monday by the company’s outside law firm, Robinson, Bradshaw & Hinson of Charlotte, and caught SunTrust executives by surprise. First Union’s lawyers identified the bill as a likely candidate for their amendments, in part because the Senate had previously approved it.

The old law allowed shareholders to call for a special meeting, provided it is allowed in a company’s bylaws. Last week SunTrust proposed a change to Wachovia’s bylaws that would allow at least 10% of shareholders to seek a meeting. SunTrust’s idea was to get it passed at Wachovia’s Aug. 3 annual meeting and push for a shareholder meeting, where it would try to elect a board that would consider its offer.

In a statement released after the bill was signed by the Governor, G. Kennedy Thompson, chairman and chief executive of First Union, said “We are pleased that the North Carolina legislature and the Governor have taken action to close loopholes in North Carolina law and strengthen the ability of businesses in our state to protect themselves against abusive tactics in unsolicited takeover attempts.”

The governor had no comment on the new law, but his spokesman, Fred Hartman, said, “We are satisfied that this bill promotes good corporate governance policy and strengthens North Carolina’s securities law by closing an outdated loophole.”

In a SunTrust statement, Jim Wells, SunTrust Vice Chairman, said, “This short-sighted legislation will have serious unintended consequences for North Carolina. It sends a clear message to investors to avoid North Carolina because shareholder rights can be taken away without warning for political reasons.”

However, there was a glimmer of good news for SunTrust on Thursday. A North Carolina Business Court ruled in favor of Theodore Hoepner, a SunTrust vice chairman who also owns shares of Wachovia and had sought to get hold of Wachovia’s shareholder list so the bank can wage a proxy battle. Late Thursday, the court ordered Wachovia to provide Mr. Hoepner with the documents by 5 p.m. June 20.

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