First Union




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continue to put the hard sell on their proposed merger in an effort to steer attention away from a competing bid from


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Friday, Wachovia Chairman L.M. "Bud" Baker sought to quell speculation about ulterior motives for the First Union deal. Announced on April 16, the deal carries a very small premium and had many observers baffled as to the logic behind it.

Baker said he has received a number of inquiries from Wachovia shareholders regarding his personal pension benefits under terms of the deal. Baker said neither he nor First Union Chairman and CEO Ken Thompson elected to receive any stock options, restricted stock or other awards or salary increases. "It is painful to me to have anyone possibly feel that I would benefit personally at their or the company's expense," said Baker in a statement.

Sandler O'Neill

analyst Katrina Blecher felt Baker's retirement compensation had received "a lot of undue press." In light of that she says she thought the move to address speculation was "quite gracious on his part." This moves the "attention back where it deserves to be, solely on the transaction," says Blecher. (She rates Wachovia and SunTrust market perform and First Union outperform. She knows of no underwriting relationship between her firm and any of these banks.)

Whether the spotlight on pay packages was deserved or not, it is clear that both First Union is pulling out all the stops to push their proposed deal for shareholder approval. On Monday, when SunTrust made an unsolicited and financially superior bid for Wachovia, a number of investors and analysts quickly warmed to the idea and said it was a better fit than a First Union-Wachovia union. But First Union's Thompson is doing his best to throw cold water on that notion.

At a

Prudential Securities

-sponsored conference in Washington Thursday, Thompson said he wanted to set the record straight in "some statements that have been made that we believe are misleading and that have appeared in analysts' reports and the press over the last few days." Thompson then launched into a list of metrics and revenue growth assumptions, the latter part of which he said were not included in the original merger presentation in mid-April.

Thompson said the internal rate of return on the First Union-Wachovia deal to Wachovia shareholders is 21%, vs. the estimated 15% to 17% of the SunTrust deal. He also said he expected it to take 1.6 years for First Union to offset the merger expenses through efficiencies compared with 4.5 years in a SunTrust deal.

In between throwing around numerical comparisons, Thompson took the opportunity to put down SunTrust's claim of being a better cultural fit with Wachovia. "First,

SunTrust CEO Phil Humann said in his presentation to analysts on Monday that SunTrust has been trying to do this deal unsuccessfully for half of his career," Thompson said. "That's 16 years and that should tell you something about the cultural fit between Wachovia and SunTrust."

Thompson went on to say that SunTrust "has not discussed comparison with First Union when these comparisons put them at a disadvantage," which sounds awfully similar to the approach that all the banks involved are adopting in this bidding war.

And if any investors are thinking of pointing out First Union's less than stellar track record on acquisitions, Thompson states: "We're tired of reading that we stumbled on a series of merger integrations. ... We corrected those mistakes, and we're moving forward."