To the resume of Leslie M. “Bud” Baker, one might now add a stint as an equity analyst.

Since SunTrust Banks Inc. initiated a hostile counteroffer to the merger pact between Wachovia Corp. and First Union Corp., a wide range of disagreement has emerged between Mr. Baker, who is Wachovia’s chairman and chief executive, and L. Phillip Humann, his counterpart at SunTrust.

In the spirit of Sun Tzu’s “Art of War,” each has delivered blows aimed squarely at the opponent’s weak point, Mr. Humann by outbidding what was widely considered to be a bargain price and Mr. Baker by pointing to First Union’s product breadth and geographic coverage as assets unmatchable by SunTrust.

But Wachovia has also latched on to SunTrust’s key advantage in the fight, its higher offer, and worked aggressively to whittle away at it.

That effort intensified last week as Mr. Baker and team took to Wall Street to present a side-by-side analysis of the two deals. Major portions of the presentation were aimed at portraying SunTrust as a weak player, and therefore a less desirable mate – the functional equivalent of slapping a “sell” rating on the company that would be Wachovia’s parent.

“SunTrust Has Hit the Wall,” one slide began. Others carried titles like “SunTrust’s 1Q Particularly Troublesome” and “SunTrust’s ‘Growth’ Businesses Stagnating.”

The style of Mr. Baker’s presentation, no doubt deliberately, echoed the analyst community’s, albeit with a share more vitriol. Still, it is by no means clear that the presentation persuaded any analysts to change their minds on whose deal makes more sense.

As the Memorial Day weekend dawned, many remained of the view that the matter was far from settled and could drag on for months. In fact, few had shifted their opinions on SunTrust since the hostile offer was launched.

The tally, according to First Call/Thomson Financial: two ratings for SunTrust at strong buy; seven at buy; and 12 at hold. On May 14, the day SunTrust launched the hostile bid, two of those analysts moved to hold from buy. None has shifted since.

As for last week’s New York road show, some analysts skipped the presentation portion of their sit-downs entirely and moved directly to the “update me on what’s going on” segment of the meeting.

“Honestly, I don’t care what the companies are saying about each other. I’ve followed some of these companies going on a decade and a half,” said Prudential Securities analyst Michael Mayo, himself no stranger to the negative rating. “It’s not an open-and-shut case for either side and I’m still in an information-gathering mode.”

For now, he said, the difference boils down to whether investors are captivated by the “transformational” nature of the First Union deal or prefer the “execution likelihood” of SunTrust’s offer, given that company’s position of being more “acquisition-ready.”

But as the companies make their case to shareholders, it may be that Wachovia’s pitch work is having some effect. SunTrust’s edge in terms of price has narrowed considerably since it launched the hostile offer, from about 17% to around 4% on Friday afternoon.

As that gap narrows, the pressure on SunTrust to increase its offer intensifies. That, in turn, contributes to the concern among some of SunTrust’s investors about the risks of a hostile acquisition.

How then to break the cycle?

One way is through a direct rebuttal, a measure SunTrust plans to take this Wednesday when it has scheduled its own presentation via conference call. On the agenda, according to the invitation to participate in the call, will be information intended “to address what SunTrust believes to be misleading and inaccurate information contained in the First Union/Wachovia investor presentation dated May 22, 2001.”

Analysts, of course, are free to fast-forward to the Q&A portion of the call.


In taking the message straight to investors, managements are put in the position of trusting the market to behave rationally and efficiently, given enough time.Nobody would argue that the short-term fluctuations in the market are particularly efficient, or always rational, of course. Still, it’s worth noting some comments from last week about just how troublesome the gyrations of the market can be.

William Poole, president of the Federal Reserve Bank of St. Louis, told a group of central bankers and economists at a conference organized by the National Association for Business Economics that the Fed’s monetary policy committee might do well to meet less frequently, simply because their meetings cause too much excitement in the financial markets.

“My view is that the Fed should meet less often rather than more often,” Mr. Poole said in comments carried by Dow Jones. (A prepared text of Mr. Poole’s speech was not available.) “In normal times the speculation about the meeting itself, when perhaps not all that much is going on ... is not particularly helpful to the policy process.”

“I certainly follow the markets very closely, and I sometimes wonder if the markets know something I don’t know,” he said. But “if the Fed were to follow the market all the time, there would be no equalizer. … That’s an invitation to chaos.”

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