Interstate Bancorp includes the predictable litany about "strategic fits" and "geographical synergies." But beneath the surface lurk intriguing questions about the personality and motivations of First Bank chairman John F. Grundhofer and his interplay with Paul Hazen, the chairman of rival bidder Wells Fargo & Co. These are the "social issues" that often spring up in merger negotiations. Once settled, they rarely resurface. But with Wells not yet retreating from its hostile pursuit of First Interstate, the social issues may play out very publicly. Some observers suspect that Mr. Grundhofer stepped in as a "white knight" at least in part because he wants to one-up Mr. Hazen, who has often stood a step ahead of him on the corporate ladder. Many bankers who know them both believe that their competitive natures and parallel career paths - they worked together at Union Bank and Wells Fargo - give them an extra motivation to complete a deal above and beyond the desire to please shareholders. "I would think there's a little bit of, 'Hey, lookit! - who's better?' going on," said one banker with close ties to Mr. Grundhofer, speaking on the condition that he not be identified. Added another West Coast banker familiar with both parties: "It's kind of like Jim Courier playing Pete Sampras. They've known each other forever." When they entered banking in the 1960s, Mr. Grundhofer, 56, and Mr. Hazen, 54, worked at Union Bank in Los Angeles, which proved to be a remarkable incubator of industry talent. For Mr. Grundhofer, a Los Angeles native, the job at then-independent Union - it was later bought by Bank of Tokyo - was the break of a lifetime. He was the eldest of three children in a family of modest means - his father was a bartender and his mother took odd jobs in retailing to help make ends meet. After attending Loyola High School he went to Loyola University on a baseball scholarship, then worked as a auto-repo man for Union Bank. Surviving what Mr. Grundhofer described as "some harrowing experiences" with irate car owners, he went on to get an MBA from the University of Southern California and returned to Union Bank as a management trainee. Union Bank was run by Harry Volk, a hard-driving, quick-witted former Prudential Insurance executive who was regarded as a California banking icon. Included among its employees were Wells' future chief executive Carl Reichardt; Mr. Hazen, who was Mr. Reichardt's protege and eventually followed him as Wells' chairman, and Robert Joss, now the chairman of Westpac Banking Corp. in Australia. Others went on to run smaller banks, including David L. Buell, chairman and chief executive of Metrobank in Los Angeles, and Jack W. Conner, chairman of Comerica Inc.'s California subsidiary, based in San Jose. Mr. Grundhofer, nicknamed "Jack," got his brother Jerry, who is six years his junior, a job in Union Bank's mailroom. Jerry went on to high- level posts at Union, Wells Fargo, Security Pacific Corp., and BankAmerica Corp., and is now chairman and CEO of Star Banc Corp. in Cincinnati. Amid all this talent, bankers said Jack Grundhofer was a standout - the one most like Mr. Reichardt in personal style and temperament. "Jack and Carl were in the same class," said a banker who worked with them. They both "had that macho man's charismatic image that everyone loved." They could "drink, play golf with customers, play cards," the banker said - and do "credit analysis as well as anyone." Jack Grundhofer was among a handful in Mr. Reichardt's favor at Union Bank, along with Mr. Hazen and Steven D. Broidy, now a vice chairman at City National Bank in Los Angeles. But some bankers suspect that Mr. Grundhofer was disappointed when Mr. Reichardt took only Mr. Hazen with him when he left for Wells in 1970 to run a real estate investment trust. "Maybe he is motivated a little bit by the frustration and disappointment at not being taken," a banker said. Any bitterness would appear to have faded by 1978 when Mr. Reichardt and Mr. Hazen successfully lobbied then- chairman Richard Cooley to hire Mr. Grundhofer to run Wells Fargo's Southern California retail banking group. After Mr. Reichardt succeeded Mr. Cooley in 1983, Mr. Grundhofer moved up to vice chairman of Wells. He was part of the senior team that led Wells' brutal but highly successful acquisition of Crocker National Corp. in 1986. But Mr. Grundhofer was reporting to Mr. Hazen, who by that time had already been made president of Wells. In an interview, Mr. Grundhofer acknowledged that one reason he left Wells was that it was "obvious I wouldn't be able to run the show." From there, Mr. Grundhofer encountered the bizarre and the tragic. Moving to First Bank in 1990, he was labeled "Jack the Ripper" for his cost-cutting practices, only to be vindicated as the institution became one of the top performers, with profits that rival Wells'. In his first year in Minneapolis, Mr. Grundhofer was briefly kidnapped at gunpoint by someone who was suspected to have been a distraught ex- employee. He escaped unharmed and the kidnapper was never caught. The incident occurred two months after one of Mr. Grundhofer's two daughters was shot seven times by a gunman firing indiscriminately into a bar at the University of California at Berkeley. She fully recovered. Mr. Grundhofer said Mr. Reichardt arranged for a private car to pick him up at the airport and take him to his daughter in the hospital. Mr. Grundhofer added that Mr. Reichardt remains one of his closest friends. They have shared a vacation home and go hunting together once or twice a year. Mr. Grundhofer also said he remains friends with Mr. Hazen, and he denies that the merger deal was driven by anything other than doing what is best for shareholders. Mr. Grundhofer did acknowledge that he and Mr. Hazen are "competitive people." People who know Mr. Grundhofer said concern for shareholders is undoubtedly primary, but they also believe he is not immune to other motivations. "I think he wants to go back (to California) and show everyone that he was as good as we all thought he was," one banker said.
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