GREENSBORO, N.C. - SunTrust Banks Inc. won another round in court late Monday when a North Carolina judge refused to dismiss its lawsuit challenging the merger agreement between First Union Corp. and Wachovia Corp.
The Atlanta company, which wants to break up the merger so it can pursue its own deal with Wachovia, sued over what it calls "egregious" break-up provisions in the merger agreement between the two North Carolina companies. After a hearing, North Carolina Business Court Judge Ben F. Tennille declined a motion by First Union and Wachovia to dismiss SunTrust's lawsuit. First Union downplayed the ruling in a statement Monday night saying, "The judge's decision today on preliminary motions means that all parties will have the opportunity to more fully develop the factual record. We are confident we will ultimately prevail in this case."
"We're alive. We can fight, and we have the opportunity now to attempt to demonstrate what we believe the actual action of the board does," SunTrust's lawyer, Richard Ellis, told Reuters.
First Union and Wachovia on April 16 announced their planned "merger of equals," which would create a huge East Coast banking franchise with 19 million customers and nearly $330 billion in assets. First Union agreed to swap two of its shares for each Wachovia share, at the time valuing the deal at $13.4 billion. Since then, the two companies have moved quickly to plan their integration. SunTrust, which discussed a merger with Wachovia several times in recent years, responded on May 14 with an unsolicited $14.7 billion offer for Wachovia. SunTrust offered 1.08 shares for each Wachovia share.
A week later, the two sides took their fight to the state and federal Courts.
SunTrust's case has been combined at the business court with a lawsuit First Union and Wachovia filed against SunTrust. That suit alleges that in preparing its offer for Wachovia, SunTrust broke a confidentiality agreement the companies signed during previous merger discussions in December. In a separate suit in federal court in Georgia in May, SunTrust alleges that First Union and Wachovia violated securities law by making "false and misleading" public statements about their merge agreement. First Union has since filed a motion to dismiss the case. SunTrust has asked the court to speed up the proceedings as the Aug. 3. Wachovia shareholders vote on the First Union deal draws closer.
Last week, Judge Tennille ordered Wachovia to turn over its shareholder list to Theodore J. Hoepner, a SunTrust vice chairman who also owns Wachovia stock. Mr. Hoepner sued after Wachovia would not release the list, saying it was afraid he would share it with SunTrust executives. But the judge ruled that Mr. Hoepner is entitled to the list and may share it with SunTrust.