CoreStates Financial Corp. chairman and chief executive Terrence A. Larsen was clearly reluctant to sell the Philadelphia bank, but the deal he got from First Union Corp. should help dull the pain.
On Nov. 18 CoreStates agreed to sell to the Charlotte, N.C., banking giant, for $16.6 billion in the most expensive bank merger to date.
The merger came six weeks after CoreStates rejected an offer in late September from Mellon Bank Corp. and had received six expressions of interest from other major banks, according to proxy materials filed with the Securities and Exchange Commission last week.
By agreeing to sell, Mr. Larsen would secure a job for the next five years as a director and vice chairman at First Union.
So far First Union has not disclosed how many of CoreStates' 19,000 employees would lose their jobs, but the bank has said it intends to eliminate 45% of CoreStates' annual expenses and incur pretax restructuring charges of $1.195 billion.
Mr. Larsen would be paid an annual salary of $1 million and a bonus of not less than $2.5 million. He would also receive 100,000 First Union shares upon consummation of the merger, plus options to acquire 200,000 more. After retiring, he or his spouse would receive $1 million per year in annual income, and his family will be eligible for $20 million in death benefits.
The advisers in CoreStates' proposed merger, which is expected to close April 30, would also benefit. J.P. Morgan & Co. would receive $17.6 million in fees, while Credit Suisse First Boston, enlisted after the Mellon Bank deal was nixed, would receive $16.6 million. First Union's adviser, Morgan Stanley, Dean Witter, Discover & Co., would receive $22.3 million for providing its fairness opinion.
Besides providing Mr. Larsen a generous package, First Union has also agreed to amply compensate some of Mr. Larsen's top lieutenants.
Charles L. Coltman 3d, vice chairman at CoreStates, Charles P. Connolly Jr., vice chairman at CoreStates Bank, and P. Susan Perotty, executive vice president, plus 29 other officers would receive severance equal to twice their highest base salary and bonus reached during the last two years. They would also receive some First Union stock.