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The board of Wachovia Corp. rejected a $13.6 billion unsolicited bid by Atlanta-based SunTrust Banks Inc. Tuesday. Wachovia will instead proceed with its $12.7 billion deal with First Union Corp. First Union has offered to sweeten its bid for Wachovia by guaranteeing Wachovia’s current dividend level of $2.40 per year. Wachovia said in a press release it found SunTrust’s hostile offer “financially and strategically unattractive.” Wachovia CEO L.M. “Bud” Baker Jr. cited SunTrust’s lagging growth over two years as one reason. Dealmakers, however, predict a long battle for Winston-Salem, N.C.-based Wachovia that could result in a proxy fight in the third quarter. Wachovia already has warned its shareholders not to tender their shares to SunTrust. SunTrust said Wednesday it is suing First Union and Wachovia in Georgia state and federal courts, alleging the North Carolina banks’ public disclosures about their deal are false and misleading. Each side has fortified its position. SunTrust is working with Morgan Stanley and Skadden Arps Slate Meagher & Flom, and Wachovia is working with Goldman, Sachs & Co., Credit Suisse First Boston, Simpson Thacher & Bartlett and Wachtell Lipton Rosen & Katz. Deteriorating asset quality and lower earnings prompted Wachovia to go on the block last fall. Negotiations with longtime suitor SunTrust almost led to a deal in December, but Wachovia executives, fearing SunTrust was trying to come out on top of the merger, backed off. Talks with First Union began shortly thereafter. Copyright (c)2001 TDD, LLC. All rights reserved.
Mergers and Acquisitions 2001. Archived Program.

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