Bidding War Takes SunTrust's Stock Down

SunTrust's (STI Quote) hostile offer for Wachovia (WB Quote) initially drew praise from analysts and investors, who welcomed the bid's premium. But as the bidding war with First Union (FTU Quote) turns into one of the nastiest in banking, SunTrust's stock price is cooling down, diluting the appeal of its bid.

When SunTrust announced its stock offer last week, its $64.81 a share price translated into a premium of about 17% over First Union's two-for-one stock swap, which it and Wachovia agreed to in mid-April. Coupled with a longstanding belief among observers that SunTrust and Wachovia make a good fit culturally, many analysts and investors seemed to be lining up behind a SunTrust deal.

But SunTrust now is down about 6% below its prebid level, after dropping more than 7% on May 14, when it announced its offer. And First Union sweetened its bid by guaranteeing that Wachovia shareholders would keep their annual dividend. ...