First Union Inches Closer to Wachovia Victory

First Union (FTU Quote - Cramer on FTU - Stock Picks) took another step Tuesday toward winning its long, contentious bidding war with SunTrust (STI Quote - Cramer on STI - Stock Picks) over Wachovia (WB Quote - Cramer on WB - Stock Picks).

First Union shareholders approved the bank's $14.4 billion acquisition at its annual meeting Tuesday morning, clearing the way for a pivotal Wachovia shareholder vote Friday. Wachovia shareholders are widely expected to approve the First Union deal. SunTrust, which made a hostile bid shortly after First Union and Wachovia announced their merger plans this spring, has said it won't raise its bid, which is valued at around $15.2 billion. Both proposals call for all-stock transactions.

In a written statement, Wachovia said: "We are extremely pleased about the strong endorsement First Union shareholders have given today for the merger of equals with Wachovia." A SunTrust spokesman responded: "Who would vote against a chance to buy Wachovia for no premium?"

In mid-April, First Union and Wachovia surprised Wall Street when they announced a stock swap that would result in Wachovia's acquisition by First Union. Some Wachovia holders criticized the deal because it didn't offer a significant premium, while some First Union owners wondered why the bank was plunging back into the mergers-and-acquisitions game so quickly after failed M&A deals resulted in the demise of CEO Edward Crutchfield.

SunTrust then entered the fray with an unsolicited bid that at the time offered a 17% premium to First Union's agreement. Initially, many people on Wall Street favored the SunTrust bid, saying it made more business sense than did the First Union deal. But since then First Union has tweaked the terms of its offer several times in response to shareholder fairness concerns, while SunTrust shareholders worried about potential dilution from the massive stock issuance a deal would entail. As a result, First Union shares have rallied and SunTrust's have fallen, narrowing the spread to less than 6%.

Lately, First Union was trading up 12 cents to $35.39, Wachovia was up 25 cents to $70.96 and SunTrust was up 14 cents to $69.28.