Oddly enough, shares of First Union Corp. might be getting a boost from the actions of its enemy in the battle over Wachovia Corp. — SunTrust Banks Inc.

Typically, shares of an acquiring company take a hit in the days and weeks after a deal announcement, and First Union shares did slip in mid-April when the friendly merger agreement with Wachovia was made public. But they quickly rebounded after SunTrust launched its hostile bid this month and have been rising ever since. Analysts said this is not necessarily because investors love the deal. Some of them, it seems, think that if Charlotte, N.C.-based First Union fails to win Wachovia, it will become takeover bait.

SunTrust “is the only reason [First Union’s investors] did not kill the stock,” said analyst John B. Wimsatt of Friedman, Billings, Ramsey & Co. in Arlington, Va.

Meanwhile, rumors rippled through Thursday’s markets of another possible deal in the Southeast — one for AmSouth Bancorp in Birmingham, Ala. Speculation started Wednesday that AmSouth had held an emergency board meeting on Tuesday. By Thursday the speculation had turned into merger rumors, and BB&T Corp. of Winston-Salem, N.C., was the main suspected buyer.

A spokesman for AmSouth would not comment on whether its board had met. A spokesman for BB&T would not comment on market speculation. Shares of AmSouth rose 4.15%, and shares of BB&T fell 0.85%.

First Union shares have risen 3.4% since SunTrust’s hostile bid, and on Thursday, they were up 0.41%. The American Banker index of 225 banks rose 0.86%, and the Standard & Poor’s 500 index rose 0.32%.

Investors said Thursday that they were reluctant to talk about First Union, but analysts said they saw little chance of SunTrust’s winning the battle. Still, the Atlanta company could succeed in preventing First Union from winning it, just as North Fork Bancorp’s hostile bid prevented Dime Bancorp from acquiring Hudson United Bancorp last year.

Some analysts said that, if First Union fails to acquire Winston-Salem, N.C.-based Wachovia, it could be vulnerable to a takeover — reason enough for First Union’s investors to stick around for a takeover premium.

In the meantime, analysts said, the uncertainty over the outcome of the current battle puts pressure on all the stocks involved.

“The risk that investors walk away from the situation is there for all three stocks,” said David Stumpf, an analyst at A.G. Edwards & Sons, who has a “reduce” rating on First Union. He said that First Union’s relatively soft landing was influenced by reasons beyond the acquisitions. The overall market for bank stocks improved significantly, he said, and First Union rose with the tide.

The S&P’s banking index has risen 7% since May 11, pulling up many stocks Wall Street had considered more risky. Bank of America Corp., which was beaten down earlier this year, has gained 12% since March 11, and First Union was up 5.3% in the same period, Mr. Stumpf pointed out.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.