SunTrust Banks Inc. has taken its battle for Wachovia Corp. to the post office.

Over the weekend the Atlanta banking company began mailing its definitive proxy statement to about 120,000 Wachovia shareholders in an effort to get them to vote down a merger with First Union Corp. and throw their support behind a Wachovia/SunTrust combination. Wachovia shareholders are scheduled to meet on the First Union proposal Aug 3.

The proxy mailing continues a battle that began in mid-May, when SunTrust made a $14.7 billion hostile offer for Wachovia. First Union's $13.4 billion offer had been announced a month earlier.

SunTrust has something else up its sleeve. As a hostile bidder, SunTrust will be allowed to continue a recently announced stock buyback program, conceivably lifting its share price and thus widening the spread between its offer and that of First Union.

Meanwhile, securities laws - specifically Regulation M - would bar First Union, which has a signed agreement with Wachovia, from continuing with its own share buyback program, a securities lawyer said. That ban would begin when First Union mails its proxy and continue until the deal is completed or the merger agreement expires in mid-January, said the lawyer, who is not involved in any of the negotiations.

First Union has filed its proxy statement and is awaiting Securities and Exchange Commission approval, a First Union spokeswoman said. The narrowness of the spread between the competing bids - now almost nothing - is one reason market watchers think SunTrust is at a disadvantage.

"It all comes down to price," said Marni Pont O'Doherty, an analyst at Keefe, Bruyette & Woods Inc. "It's going to be a close vote. The bids are so close that there's not really a compelling reason for Wachovia to vote down the First Union offer."

Wachovia is on track to get its proxies to shareholders, said Jay Reed, a company spokesman. He described SunTrust's letter to the board as a "calculated ploy to further its hostile bid for Wachovia, while trying to premise it in terms of shareholder protection." He added, "In the meantime we are moving forward with First Union to create the new Wachovia.".

The proxy statement currently landing in the mailboxes of institutional and retail shareholders reiterates SunTrust's belief that a SunTrust/Wachovia combination would be the better deal for shareholders and for Wachovia.

SunTrust also uses the proxy statement as another opportunity to attack last week's change in North Carolina law, which closed a loophole that would have allowed for Wachovia shareholders to call a special meeting if the Winston-Salem, N.C., company's bylaws had been amended to allow it. SunTrust had proposed a change to Wachovia's rules that would have allowed just 10% of the bank's shareholders to call a meeting.

However, First Union, of Charlotte, N.C., hastily lobbied North Carolina lawmakers to amend legislation on the issue, which they did last week. SunTrust's chairman, L. Phillip Humann, has already written to Wachovia's 100 largest institutional shareholders expressing his disgust over what he described as an "extraordinary evisceration of shareholder rights."

But the Atlanta bank has not limited itself to communications with shareholders in recent days.

On Friday, SunTrust fired off a letter to Wachovia's board requesting that they include a vote at the Aug. 3 shareholder meeting on a proposed charter amendment restoring the right of Wachovia shareholders to call special meetings.

Asked Monday what SunTrust hopes to achieve by mailing the proxies, bank spokesman Barry Koling said, "We would hope and expect that the Wachovia shareholders would consider the merits of both proposals and perceive the superiority of ours and vote accordingly." And reflecting the back-and-forth that has characterized this merger battle, Mr. Koling said, "We encourage [shareholders] to compare the two sides, they encourage them to throw them away."


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