Wells Fargo & Co. and First Interstate Bancorp made it official Wednesday, saying their landmark $11.6 billion deal to merge would wring out $800 million in expenses and $100 million in revenues from the combined entity.
But the companies skirted the issue of whether a deal between the second- and third-largest banks in California would be a "devastating blow" for the state, as First Interstate Chairman William E.B. Siart predicted earlier this month.
San Francisco-based Wells said that its initial projections, made when it first announced its hostile takeover bid in October, still hold.
Within 12 to 18 months of the transaction's planned closing, the bank plans to divest California branches with about $1 billion of deposits and associated loans, primarily in Sacramento and San Diego.
Some 350 of First Interstate's 406 branches in the state are to be closed, and job-losses in the state are likely to total 4,000 to 5,000.
More job losses apparently are possible in back-office operations elsewhere in First Interstate's 13-state territory. But Wells officials have so far declined to give a specific number.
The bank would retain the Wells Fargo name, operate a second headquarters for lines of businesses in Los Angeles, and supplement its board with seven First Interstate directors who have yet to be selected.
The combined bank would have assets of $108.4 billion, bumping Wells up nine notches in the rankings of the country's biggest banks, to number eight. The transaction value is the largest ever in banking.
Wells Fargo chief financial officer Rodney Jacobs told analysts that the deal is likely to close either on April 1 or May 1, pending approval from state and federal regulators, as well as the conclusion of an anti-trust agreement with the Justice Department.
Wells Fargo chairman and chief executive Paul Hazen and president William Zuendt would continue in their respective roles. Mr. Siart would stay on until the merger is consummated, then leave with a $4.6 million golden parachute. No other executive appointments were announced, and Mr. Siart declined to comment on his future plans.
Wells Fargo, First Interstate, and jilted white knight First Bank System Inc. have all agreed to drop lawsuits against each other stemming from the takeover battle. First Bank would get a $200 million breakup fee.
Not surprisingly, Mr. Siart and other former opponents to the Wells bid were muting their objections Wednesday. Mr. Siart confined himself to touting benefits to shareholders, and noting that consolidation-related job losses are inevitable in banking.
"We've created a winner for shareholders in joining with Wells Fargo," he declared. "We think it can be a great banking organization, a strong banking organization, the best in the country."
Los Angeles Mayor Richard Riordan, who had been one of the biggest boosters of the friendly merger between First Interstate and First Bank, has been reduced to saying he is a "realist" who would try to get the most that he can for his city from Wells.
Wells officials said this could include more purchases of professional services from Southern California companies, and details as to how much of Wells' $45 billion community reinvestment pledge would be allocated to the area.
For his part, Mr. Hazen argued Wednesday that Wells Fargo would create many more jobs by increasing its small-business lending than it would eliminate in the merger. He also said consumers would benefit by Wells Fargo's efforts to improve customer convenience by selling more banking services electronically and through supermarkets.
He also said he expected that greater efficiencies would allow Wells to reduce some banking fees, citing a new no-fee automated teller machine account the bank recently introduced.
Mr. Hazen added that job losses would affect both Wells and First Interstate employees. He said the cuts would be spread equally throughout out management and rank-and-file. The job losses would be softened by attrition and hiring freezes at both banks. Wells instituted a freeze in October; First Interstate in December.
For their part, several First Interstate employees, speaking on the condition they not be named, said they had in recent days begun to believe that a merger with Wells was inevitable.
"Everyone was thinking Wells will get it," said one former First Interstate employee who recently left for another job.
Other employees added that, so far, there has been no "brain-drain" at First Interstate because the company has a "pretty good severance program."
Mr. Hazen said that First Interstate's existing severance benefits would remain in place after the merger. These benefits would also be extended to all current Wells Fargo employees, since the benefits are better than what Wells currently offers.
Mr. Zuendt also elaborated on Wells' controversial plans for supermarket branches. He said that Wells' plans for opening such branches in California would not be changed by the merger with First Interstate.
Wells has said that it plans to close traditional branches and open new supermarket branches in the state so that nearly three-quarters of its network, not including First Interstate branches, would be in grocery stores by the end of 1996. At that time, Wells expects to have a total of 1,100 staffed locations in California.
Mr. Zuendt added that Wells would start opening supermarket branches in the 12 additional states it would inherit from First Interstate after the merger is completed.