SunTrust Banks Inc. on Monday portrayed its $14.7 billion hostile bid for Wachovia Corp. as the culmination of merger talks that inexplicably went awry at the last minute but made it clear that it would have the upper hand in the union should Wachovia shareholders accept the offer.
We were supposed to be in this very room on Monday, Dec. 18, 2000, to appear with Wachovia management and announce a merger, L. Phillip Humann, SunTrusts chairman, president, and chief executive officer, told analysts in a morning conference call.
To the extent theres a hostile offer out there its not the SunTrust offer, he said.
Earlier in the day SunTrust, of Atlanta, announced that it had sent an offer to Wachovias board of directors to acquire the company for $70.06 per share.
And SunTrust is tossing some cash into the kitty. As additional incentive to Wachovia shareholders, SunTrust is offering to increase its own annual dividend to $2.22 a share, so that Wachovia shareholders would continue to get the $2.40 dividend they now do. First Union Corp.s offer provided a special one-time dividend of 48 cents. After that dividends would revert to the current 96 cents.
In a press statement, Wachovia confirmed it had received the SunTrust proposal and said its board would meet soon to review it.
A statement from First Union was not available at deadline.
If it wins the bidding contest for Wachovia, SunTrust would have $180 billion of assets, 7.5 million retail customers, and leading deposit market shares in Georgia, South Carolina, and Virginia, the company said in a press statement. The combination would be far smaller and more concentrated in the Southeast than First Union-Wachovia, which would have $330 billion of assets and 19 million customers spread up and down the East Coast.
SunTrust said the deal would create a strong asset management business, with $138 billion of assets under management. First Union had also highlighted the potential of combining its asset management capabilities with Wachovias affluent client base.
The new SunTrust would be headquartered in Atlanta, with Winston-Salem, N.C. currently one of Wachovias two headquarters cities as headquarters of the Carolinas banking franchise, SunTrust said in a securities filing. Mr. Humann would be chief executive of the combined company. The company would divest $1.5 billion of deposits.
SunTrust went to some lengths to avoid using the word hostile on Monday, calling its actions a competing offer, but the tenor of the conference call left little doubt that its intentions were not as friendly as they once might have been.
The Atlanta company made it clear that it is offering fewer concessions than it would have before talks were broken off in December, starting with the proposed entitys name. Back then SunTrust had agreed to retain the Wachovia name. But this is not December, and this is SunTrust, Mr. Humann said on Monday.
In its own agreement with Wachovia, forged over the Easter weekend, First Union agreed to adopt Wachovias name.
SunTrust said that because there would be little geographical overlap between the two companies, it would expect to eliminate about 4,000 jobs, or 8% of the combined work force. First Union has said it expected to eliminate 7,000 jobs.
SunTrust said the deal would help it save about $500 million over a three-year integration period.
Still, SunTrust would pay more for Wachovia than it had planned in its December bid, and it is not clear why SunTrust would attempt a hostile bid after being turned away in the first place.
We are kind of searching for why SunTrust would take this on, said Matt Snowling, an analyst at Friedman Billings Ramsey & Co.
Nancy Bush, an analyst at Ryan, Beck & Co., said that though SunTrusts offer might be more attractive than First Unions the likelihood of its succeeding is slim. Its very tough for hostile deals to work.
Also, the fact that SunTrust had come so close to an agreement to buy Wachovia before talks were broken off means for some reason Wachovias board has bought in to First Unions offer, she said.
Wachovia shareholders would get 1.081 share of SunTrust common stock for each Wachovia share. Based on SunTrusts Friday closing price of $64.81, that would produce a 17% premium to First Unions pending acquisition of Wachovia, announced April 16.
The offer would also be a 15% premium to Wachovias closing price Friday and more than SunTrusts original proposal of a 12% premium in December. As of 4 p.m. Monday, SunTrusts stock had sunk 7.21%, to $60.14, reducing the value of its offer to about 6% more than First Unions.
On Dec. 14, about 27 hours before the boards of SunTrust and Wachovia were to meet to approve the transaction, Wachovias CEO called me to terminate discussions based on some alleged unsolved differences in our approaches to the wealth management business, Mr. Humann said. We didnt understand back then, and dont to this day.
He said that when he heard about First Unions offer on April 16, we were perplexed and honestly dumbfounded to hear of the First Union transaction, which was inferior to our December transaction in virtually every respect.
Mr. Snowling said SunTrust would have lower integration risks than First Union. SunTrust and Wachovia are similar in their focus on residential mortgage lending, he said.
The SunTrust-Wachovia balance sheet compares more favorably than a combined First Union-Wachovia, Mr. Snowling said. It will present a better risk profile.
Patrick Reilly contributed to this report. 
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