Offsetting Victories for SunTrust and First Union in Wachovia War
Thursday's tally in the
Wachovia
(WB) - Get Report
bidding war: one point for
SunTrust
(STI) - Get Report
, one for
First Union
(FTU)
.
Hostile-bidder SunTrust racked up a major legal victory when a judge ruled Wachovia must release its list of shareholders, which should help SunTrust make its case. But friendly suitor First Union was also feeling good after pushing through legislation in North Carolina that prevents shareholders from calling special meetings. SunTrust fell 28 cents to $61.38, First Union fell 47 cents to $32.49 and Wachovia lost 61 cents to $67.40 in trading Thursday.
As the summer heats up, so too does the bidding war for Wachovia, with a shareholder vote on the agreed-upon First Union deal scheduled for Aug. 3. In the meantime, SunTrust is pulling out all the stops to sell its offer to Wachovia shareholders.
The legal decision in North Carolina will put Wachovia's shareholder list in SunTrust's hands. Given that Wachovia's board has already voted against a SunTrust deal, SunTrust knows it must make a strong pitch directly to shareholders. Its bid is currently valued at about $66.35 for each Wachovia share. First Union's offer is valued at $64.98 based on today's closing price, meaning the spread between the deals has narrowed to 2% from 17% in April, as SunTrust shares have swooned and First Union's have recovered.
Guy Wyser-Pratte, CEO of investment consulting company
Wyser-Pratte
, thinks the competition can only benefit Wachovia shareholders. "I do think
the competing offers are in Wachovia shareholders' best interests, though not necessarily management's," says Wyser-Pratte. "Whenever a bid is called hostile, there is always the issue of who it's hostile to. In this case it is certainly not hostile to shareholders." SunTrust attorneys told the judge that SunTrust's ability to wage a proxy battle would be hampered if it lacked access to the shareholder list.
"Wachovia should be interested in good governance. To hide behind one's own incumbency is not the way to resolve the issue," says Wyser-Pratte. "The good-governance route involves having two bidders make their case as to who has the better strategic plan going forward."
Yesterday, SunTrust boosted the number of shares in an ongoing buyback plan to 15 million from 10 million, a move the bank said was aimed at convincing Wachovia shareholders of the benefits of its proposal. The bank also said it hopes to boost a stock price it thinks is undervalued right now.
On a darker note for SunTrust, the bank was unsuccessful in fighting legislation pushed through in North Carolina by First Union that prevents shareholders from calling special meetings. First Union CEO Ken Thompson praised the new legislation in a statement, saying it would "strengthen the ability of businesses in our state to protect themselves against abusive tactics in unsolicited takeover attempts. This legislation is particularly important in view of SunTrust's recent attempt to exploit these loopholes."
A SunTrust spokesman called the legislation "short-sighted" and "unconscionable." In early June, SunTrust sought to amend Wachovia's bylaws so that holders of 10% or more shares could call a special meeting.