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First Union and Wachovia to Merge

L ate last month, Bank One Corp. agreed to buy the $8 billion credit card portfolio of Wachovia Corp. As a result, approximately 2.8 million customer accounts will move to First USA, Bank One's credit card unit. The companies also entered into a long-term agent bank relationship under which Wachovia will offer its branded credit cards to retail customers, with servicing provided by First USA. L.M. Baker Jr., Wachovia chairman and CEO said, "This course of action enables Wachovia to reinvest in areas more in line with our relationship strategy."

How true. About a week later, Wachovia and First Union announced their plans to merge. Under the agreement, First Union will offer about two of its shares for each share of Wachovia. The combined company, which will be known as Wachovia Corporation, will offer its 19 million combined customers corporate banking, retail banking, asset and wealth management, capital markets and securities brokerage services and products. The merger will result in 7,000 job cuts, half of which will come from attrition.

G. Kennedy Thompson, chairman, president and CEO of First Union, said, "While scale is important in this business, this merger is about getting better, not just bigger." The companies expect the merger integration process to be completed in three years. At that time, Baker will become chairman of the new organization and Thompson will become president and CEO. The board of directors of the combined company will be made up of 18 members, nine from each bank's board.

"Together, this new company will have what super-regional banks rarely have: a full line of financial products, services and distribution capabilities, sufficient density of coverage and depth of talent to leverage its leading share in key growth markets, strong capital position and an experienced management team. These strengths will enable superior growth rates in revenues and profits," said Baker.

There was speculation that another bank was eyeing Wachovia last year. According to an SEC filing, Wachovia held "exploratory discussions regarding a potential business combination" with another financial institution last year. Also, this other institution reportedly contacted Wachovia the day before the board approved the First Union deal, but was turned down due to "differences in operational and business strategies, among other considerations."

First Union has $253 billion in assets and operates banking facilities in 11 East Coast states and Washington, D.C. For more information visit www.firstunion.com.

Wachovia is an interstate financial holding company offering banking and financial services to individuals primarily in Florida, Georgia, North Carolina, South Carolina and Virginia, and to corporations and institutions throughout the United States and globally. Wachovia Corporation is headquartered in Winston-Salem, N.C., and Atlanta, and had assets of $74 billion as of December 31, 2000.