G. Kennedy Thompson, First Union Corp.s chairman and chief executive, defended his planned merger of equals with Wachovia Corp. on Thursday, arguing that it would create a stronger, faster-growing company than would be created if Wachovia eloped with SunTrust Banks Inc.
Mr. Thompson spoke publicly about the deal for the first time since SunTrust, a hostile bidder, threw its hat in the ring last weekend by offering a higher price than in the deal First Union struck last month with Wachovia, of Winston-Salem, N.C.
Speaking at a Prudential Securities-sponsored conference in Washington, he dodged questions on whether Charlotte-based First Union might sweeten its offer. Asked whether he foresees a bidding war with SunTrust, Mr. Thompson said only: We are very committed to this deal. We understand shareholder value. But beyond that, I dont want to talk about our strategy.
Mr. Thompson said SunTrusts offer for Wachovia is about getting bigger, not better the opposite the First Union/Wachovia deal as he characterized it the day it was announced.
He also said Thursday that First Unions offer would be immediately accretive to Wachovia and First Union shareholders and would carry fewer risks than a hostile takeover by SunTrust.
A combined Wachovia-SunTrust would lack sufficient scale to compete either regionally or nationally in either wealth management or brokerage, two high-growth areas where First Union has an advantage as it combines with Wachovia, Mr. Thompson said. A Wachovia-SunTrust combination would likely be forced to pursue acquisitions in those areas and create more risk for shareholders, he said.
Mr. Thompson was joined by Robert Kelly, First Unions chief financial officer, at the conference that was billed as a forum on regulatory issues and President Bushs first 100 days in office. However, the First Union chief put aside prepared remarks on convergence in the financial industry, and instead attacked SunTrusts competing offer for Wachovia.
SunTrust is offering Wachovia shareholders 1.08 of its shares for each Wachovia share. Last Fridays closing price would make the deal worth about $14.7 billion. The Wachovia-First Union merger agreement, valued at $13.4 billion when it was announced April 16, would swap two First Union shares for each Wachovia share.
First Union may have the upper hand at the moment, even though its proposal was worth more than 7.5% less than SunTrusts at Thursdays closing prices. Both the Wachovia and First Union boards have already approved the purchase, and a joint integration team has been meeting for several weeks.
Nonetheless, Wachovias board may find it difficult to simply toss aside SunTrusts offer, which many analysts agree is the better one for Wachovia shareholders. SunTrust has long been seen as the logical partner for Wachovia, and the two companies were within days of announcing a merger in December when the deal inexplicably fell apart.
Wachovias board has yet to take up SunTrusts bid. A spokesman Thursday repeated previous statements that the board would meet in the near future, though those familiar with the situation say it could be as early as next week.