On April 22, less than a week after Firstar Corp. announced flat first- quarter results, chairman Roger F. Fitzsimonds got a call from his counterpart at Star Banc Corp. in Cincinnati, Jerry A. Grundhofer.
That contact, documented in a proxy filing last week as the beginning of the companies' merger courtship, was also less than a week after Mr. Fitzsimonds had told his annual shareholders meeting that Firstar intended to remain independent.
During the same month, Mr. Fitzsimonds reportedly told Firstar insiders the bank would "be independent into the millennium."
When the Star-Firstar deal was announced July 1, investors and employees were caught completely off guard.
Some insiders at Milwaukee-based Firstar are still angry about it. "Fitzsimonds said the company's not for sale, and within one week he's dancing with Grundhofer," said one executive.
Neither Mr. Fitzsimonds nor Mr. Grundhofer was available to comment on these reactions.
According to the filing with the Securities and Exchange Commission, neither banking company was considering any other merger partner.
Much of their negotiations took place outside the presence of their merger advisers-Credit Suisse First Boston for Star, and Merrill Lynch & Co. for Firstar.
During several weeks, as Mr. Grundhofer and Mr. Fitzsimonds discussed terms of the agreement, neither adviser "took part in negotiating key provisions," the proxy said.
Shareholders are to vote on the deal Oct. 27. The combined company, to be called Firstar and based in Milwaukee, would have $38 billion of assets and $28 billion of deposits. Mr. Grundhofer is to be chief executive officer, and Mr. Fitzsimonds chairman. They hope to close the transaction Dec. 1.
Wall Street has generally looked favorably on the deal. Both companies' stocks have been affected by market volatility, but the combination lacks "the cultural risks you have in the larger transactions," said McDonald & Company Securities analyst Gerry Cronin.
The SEC filing lays out both sides' rationale for agreeing to merge. Firstar directors and management said they were influenced by economic and competitive pressures, and cited the "increasing importance of operational scale."
Firstar also called attention to Star's consistently strong stock price performance, consumer banking expertise, and the depth of its management, which would be in control after the merger.
Mr. Fitzsimonds and Firstar president and chief operating officer John Becker would keep their jobs, but 20 of Firstar's top officials were told in August they would be laid off.
Star cited its ability to cross-sell products over a larger customer base as one reasons to merge. Star, though the acquirer, has fewer assets and deposits but a higher stock valuation than the Milwaukee company.
According to the proxy, the combined company would also benefit from $174 million in expense reductions.