Nations Bank Paying $15.5 Billion for Barnett--Biggest Price Ever

NationsBank Corp. and Barnett Banks Inc. had no intention of unveiling their blockbuster merger deal last Friday.

A rumor-charged market and a press corps hungry for merger scoops changed that.

After word of a pending sale of Barnett leaked out late Thursday, the negotiations were forced into high gear. Plans to iron out details at a leisurely pace over the Labor Day weekend fell by the wayside, an attorney working on the deal said.

An extraordinary chain of events left the banking companies with just a few hours to hammer out the priciest U.S. bank merger to date.

NationsBank chairman Hugh L. McColl shrugged off suggestions that he had been rushed. "Like all these types of discussions this was a moving target, and you're never sure."

Even so, big-bank mergers are typically far more stately affairs. Terms are hammered out, lines of succession are established, and regulators are consulted before word gets out.

The process leaves plenty of time for the boards of directors to look at the agreement and add finishing touches-and for the deal to be unveiled with fanfare.

Here, the boards had only hours to review the deal against the unseemly backdrop of a trading halt and a media circus.

The drama started Thursday afternoon, when Barnett's stock popped on rumors that it had an offer. A half-dozen suitors were said to be in the running. Among them: First Union Corp., Banc One Corp., SunTrust Banks Inc., and Wachovia Corp.

It seemed that nearly every big Wall Street investment bank and law firm was representing some prospective buyer, giving rise to rumor upon rumor.

When the market opened at 9:30 Friday morning, the nebulous chatter suddenly took shape. Trading of NationsBank and Barnett was halted pending an announcement from the companies.

At 10:06 NationsBank issued a one-sentence statement: "Barnett and NationsBank have asked the New York Stock Exchange to halt trading of their respective stocks pending an announcement later today concerning their potential merger." Barnett soon followed with a similar statement.

With those statements, the odds for a merger seemed to improve, but it remained far from certain.

"Ordinarily, a bank in Barnett's position would put out a statement saying they're exploring their options," said Ronald H. Janis, partner at Pitney, Hardin, Kipp & Szuch.

But he added that it was hard not to conclude a deal was imminent. "They had to have been extremely close, or they could have opened themselves to charges of premature disclosure."

Edward Herlihy, partner at Wachtell, Lipton, Rosen & Katz, NationsBank's outside counsel, said Friday that the deal had in fact been agreed upon Thursday night. He said the companies asked for the trading halt to prevent speculators from driving up Barnett's share price Friday morning, which could have forced the banks back to the bargaining table.

"The stock was gyrating like crazy the day before," Mr. Herlihy said. "We didn't want people getting hurt."

At 1:28 p.m., NationsBank and Barnett ended the uncertainty, announcing they had reached a definitive agreement. Their shares resumed trading at 2:30 p.m.

People close to the deal said the delay was simply a matter of getting the boards from the two banks together to approve the merger.

But other parties bidding for Barnett dispute that. They say there was no definitive deal until late Friday morning.

"Negotiations didn't start until Wednesday afternoon, so due diligence couldn't have started until that evening at the earliest," a source said. "Getting a $15 billion deal done in such a short time is astonishing."

A source familiar with the negotiations, which took place mainly in the New York offices of Wachtell Lipton said the two banks had been talking for "eight or nine days" so that there was sufficient time to check out the bank's books.

Had Barnett's stock continued to trade Friday, the rumors that were all over the business press would have likely made any deal even more expensive for NationsBank, because investors were primed to throw money at Barnett's stock after reading about all the companies interested in it.

The fact that the story didn't leak earlier than it did is remarkable considering the number of people at the negotiating table.

NationsBank was advised by Goldman, Sachs & Co., Merrill Lynch & Co., and Montgomery Securities, and its law firm was Wachtell, Lipton. Barnett was advised by Morgan Stanley, Dean Witter, Discover & Co., J.P. Morgan & Co., and the law firm Skadden, Arps, Slate, Meagher & Flom.

Although the halt in trading effectively killed rumors about any other bank buying Barnett, analysts said it might also have served NationsBank's interests.

"NationsBank's request to halt trading was its way of saying, 'This is the rumor that the market should be focused on,'" said Stanley T. August, bank bond analyst at First Union Capital Markets.

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