CoreStates Director Pushed 1st Union Deal

The planned sale of CoreStates Financial Corp. to First Union Corp. offers a new twist on the use of an old merger tactic: the bear hug.

These pointed and mildly threatening statements of intent are customarily dispatched by executives of an acquisitive bank after more gracious efforts have failed to persuade the target bank's management.

In the case of CoreStates, the bear hug arose from within the bank's own ranks. Even more extraordinary, it came from a key individual shareholder, not a large and distant institutional investor.

People familiar with the sale of CoreStates say director George Strawbridge Jr., 60, a wealthy Philadelphian who owns a 2.4% stake in the company, was instrumental in persuading CoreStates' independence-minded board, led by chairman and chief executive Terrence A. Larsen, to consider selling the bank.

Although dissident board members and institutional shareholders, such as Michael Price, have previously pressured banks into selling, analysts and merger advisers could not recall an individual shareholder triggering a change in control at one of the country's biggest banks.

Mr. Strawbridge performed a similar role in Delaware Trust Co.'s sale to Meridian Bancorp in 1988, and then pushed Meridian to sell to CoreStates in 1996.

The investor could not be reached for comment, and his lawyer did not return a phone call. But a source close to CoreStates insisted the situation was "nothing like Meridian."

The source said directors reached a decision to sell after Mr. Larsen presented the First Union offer late last week and had never been "committed to independence in perpetuity."

Nevertheless, judging from the board's earlier statements, a majority favored independence until the very end. But the way most bank boards are set up today made it possible for minority views to get a hearing.

"Many companies have established structures giving outside directors the ability to push banks in directions their managements might not want to go," said Chris Bellini, banking lawyer at the Washington firm of Gibson, Dunn & Crutcher.

Many bank boards, he said, have established executive committees on which individual directors can wield great influence.

Mr. Strawbridge was not a member of CoreStates' executive committee, a spokeswoman said. But advisers say that if a single merger-minded director can lobby enough executive committee members to consider a sale, the matter is put before the entire board.

Once that happens, selling at an attractive premium can be hard to withstand, especially if shareholders are aware of offers.

"The CoreStates sale shows how hard it can be to stay independent after the cat is out the bag," one investment banker said.

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