CNN/Money One for credit card only hard offer form at $9.95 One for risk-free form at $14.95 w/ $9.95 upsell  
News > Fortune 500
Wachovia buys SouthTrust
Stock deal worth $14.3B to create the largest bank in the Southeast, but 4,300 jobs will be cut.
June 21, 2004: 10:29 AM EDT

NEW YORK (CNN/Money) - Wachovia Corp. agreed Monday to buy SouthTrust Corp. in a $14.3 billion stock deal that will create the largest bank in the Southeast U.S., but the companies said 4,300 jobs and 130 to 150 branches will be eliminated as part of the merger.

The job cuts amount to about 4.4 percent of the companies' combined work force of 98,000. The branch cuts total about 4 percent to 5 percent of the companies' combined branch base of 3,200.

The deal will give SouthTrust shareholders 0.89 share of Wachovia for each of their shares, worth about $41.83 based on Friday's closing price. That represents about a 20 percent premium on SouthTrust shares, which closed Friday trading up 9 cents at $34.80.

"They paid a full price," Jason Goldberg, an analyst for Lehman Brothers Inc., told Reuters.

SouthTrust (SOTR: up $4.47 to $39.27, Research, Estimates) shares rose sharply in early trading Monday, while Wachovia (WB: down $1.99 to $45.01, Research, Estimates), the nation's No. 4 bank in terms of assets, saw shares fell.

Wachovia said the deal should add to earnings per share within 24 months, excluding merger-related expenses, intangible amortization and preferred dividends. It should add to earnings excluding only merger-related expenses and preferred dividends within 30 months.

"From the standpoint of gaining market share and remaining competitive, it's a step in the right direction," Tim Woolston, who helps invest $4 billion for Boston Advisors Inc., told Reuters. "The question becomes whether they paid the right price."

The combined company is expected to have $464 billion of assets, $267 billion of deposits, 3,200 branches, 5,300 automated teller machines and 98,000 employees.

The companies estimate annual after-tax savings of $255 million following a 15-month integration period. Both firms also estimate one-time after-tax merger-related costs of $431 million over the integration period. They also expect less than $1 billion in deposits would be divested as a condition of regulatory approval.

The transaction is expected to close in the fourth quarter of 2004. It faces regulatory and shareholder approval.

Wachovia Corporation
SouthTrust Corporation

Birmingham, Ala.-based SouthTrust has 712 banking and loan offices in Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Texas and Virginia. Charlotte-based Wachovia has banks in 11 East Coast states stretching from Connecticut to Florida.

The companies' statement said the combination creates the No. 1 bank in the Southeast, with 18 percent deposit share. It also gives Wachovia a presence in the fast-growing Texas market.

Wachovia, the former First Union, has grown rapidly through acquisition, although it has basically stayed away from bank purchases since the 2001 merger of the two banks. Its most recent major deal was the 2003 combination with Prudential Financial's retail brokerage operations.  Top of page

  More on NEWS
Anheuser-Busch orders 800 hydrogen-powered semi trucks from Tesla rival Nikola
H&M and Zara ditch mohair wool after animal cruelty expose
US and China kick off talks to avoid a trade war
Gas prices are up 31% from last Memorial Day. Here's why
SoulCycle isn't going public -- for now
Visa suspends Morgan Freeman campaign after accusations of inappropriate behavior

graphic graphic