SAN FRANCISCO - Wells Fargo & Co. electrified the industry on Wednesday by launching an unsolicited takeover bid for First Interstate Bancorp.

The offer - a stock swap valued at more than $10 billion, or nearly three times First Interstate's book value - was received enthusiastically by investors and analysts, but got a decidedly cool reaction from First Interstate's chairman and chief executive, William E.B. Siart.

"I am deeply disappointed that Wells Fargo would take this uninvited action," Mr. Siart, 48, said in a prepared statement.

Observers said a takeover battle is possible, with other banks coming to the table to make an offer. But analysts added that it is unlikely that another bank could make an offer that would top Wells'.

Unsolicited takeover bids are extremely rare in banking - and even rarer among the industry's giants. The last big one was Bank of New York Co.'s 1988 takeover of Irving Bank Corp.

If Wells succeeds, it would not only increase its influence in California but expand its reach into 12 other western states. The combined company would have assets of $105 billion, ranking No. 8 nationwide.

The proposed deal would rank as the largest acquisition in banking, eclipsing the $10 billion merger agreement between Chase Manhattan Corp. and Chemical Banking Corp.

Wells' hostile bid follows years of discussions between the companies, including a private, unsuccessful offer that Wells made to buy First Interstate only a year and a half ago.

By making this new offer public, Wells is trying to rally investors behind its cause, said Wells chairman and chief executive Paul Hazen.

Speaking at a news conference in the penthouse suite of Wells Fargo's San Francisco headquarters, Mr. Hazen said shareholders would benefit from the merger of Wells, California's second-biggest bank, and First Interstate, the state's third biggest.

Mr. Hazen, 53, added that he discussed Wells offer with Mr. Siart as recently as Tuesday night. But Mr. Siart, according to Mr. Hazen, said that First Interstate doesn't want to accept Wells offer now because the bank needs to take another six months to explore its strategic alternatives.

Mr. Hazen said those alternatives include acquisition by Wells or by other banks, or staying independent. But Mr. Hazen said he sees no reason for First Interstate to wait.

"We should be going forward with this merger today," Mr. Hazen said.

Mr. Hazen added that investors reaction to the deal meant that they agreed. Wells stock surged $15.375, to $229, while First Interstate's rose $34.75, to $140.75.

"I'm thrilled; it's a hell of a deal," said Harry V. Keefe Jr., head of the hedge fund Keefe Partners in New York, who said he owns 500,000 shares of First Interstate stock.

"I want Wells Fargo stock for my First Interstate, I really do," Mr. Keefe said.

Mr. Hazen said that Wells' biggest investors, including Warren Buffett, also supported the merger.

Wells would exchange 0.625 share of its stock for each share of First Interstate stock. Based on the Wednesday closing price, that would value each First Interstate share at $143.125 and make the price 2.98 times First Interstate's book value.

Wells would expect to make $700 million of cost cuts with the merger, or about 18% of the companies' combined expense base. Wells would also take a restructuring charge of $700 million when the deal is completed, and would expect to lose $100 million in yearly revenues from customer defections.

The company would also incur some $7 billion of goodwill, which would have to be written off against earnings in $400 million chunks for 25 years. That's because, unlike in most bank acquisitions, Wells would account for the transaction as a purchase rather than a pooling of interests.

Wells is using purchase accounting so that it isn't restricted on making stock buybacks, which happens during pooling transactions. Goodwill, which represents the price paid above book value, is accrued in purchase transactions but not in pooling transactions.

Wells Fargo officials told analysts that a purchase would result in a 10% hit to reported earnings next year. There would be no dilution in 1997, a 10% increase in 1998, a 13% increase in 1999, and 16% increase by the year 2000.

But Wells officials said the real benefit to the merger is its cash generating potential. That's because the goodwill that is written off against earnings is added to capital that the company can use for stock purchases.

Wells would expect the deal to boost the cash it can use for stock buybacks by 6% next year, 27% in 1997, and by a third by the end of the decade. Wells figures it could buy back $3 billion of its stock by the year 2000 without the merger, but $7.5 billion with it.

Such buybacks increase returns on equity, and, in theory at least, boost share prices.

"Cash is king," Wells chief financial officer Rod Jacobs told analysts.

First Interstate, under Mr. Siart's predecessor Edward Carson, completed one of the most remarkable turnarounds in banking, going from a money-loser to a bank with some of the highest returns on equity and earnings-per-share growth in the industry.

Mr. Siart, who became chairman only this year, has told analysts that he expects First Interstate to continue ranking among the top-performing banks for the foreseeable future. Many people who know Mr. Siart have said they have expected him to do everything he can to continue running First Interstate in order to make his mark.

Mr. Siart said Wednesday that First Interstate will review the Wells offer, along with a wide range of other alternatives, and respond when appropriate.

But most observers said that First Interstate will have a hard time rejecting Wells Fargo's offer. For Mr. Siart and his management team, this could be tough to swallow. Mr. Hazen said it has not yet been decided what, if any, role Mr. Siart and the rest of First Interstate's senior management would have in Wells Fargo.

First Interstate has retained as its investment bankers Morgan Stanley & Co. and Goldman, Sachs & Co., according to knowledgeable sources. Both companies have helped First Interstate with acquisitions.

Wells Fargo has retained CS First Boston Corp. and Montgomery Securities.

The Los Angeles office of the New York-based law firm Skadden Arps Slate Meagher & Flom is representing First Interstate in the takeover fight. Skadden Arps was involved in many of the hostile acquisition bids of the 1980s. Skadden partner Joseph Giunta, contacted at his Los Angeles office, refused to comment on the Wells' bid.

First Interstate also has the New York-based proxy solicitation firm Georgeson & Co., another veteran of 1980s takeover battles, in its camp.

Jacqueline S. Gold and Daniel Kaplan contributed to this report.

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