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First Union in $16.6B deal
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November 18, 1997: 7:21 p.m. ET
Marriage with CoreStates would be biggest bank merger in history
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NEW YORK (CNNfn) - First Union on Tuesday said it will buy CoreStates Financial Corp. for $16.6 billion in a deal that would be the biggest banking merger in history.
The two banks signed an agreement late Tuesday where First Union will exchange 1.62 shares of its stock for each share of First Union, or about $83.84 a share based on First Union's closing price on Friday.
The purchase price would represent a six percent premium over CoreStates' closing price on Tuesday.
"CoreStates has established leadership positions in corporate banking, international trade finance, cash management, small business banking, electronic banking, retail banking and other key areas," said Edward Crutchfield, chief executive of First Union.
The merger would beat NationsBank's $15.5 billion pending purchase of Barnett Banks Inc.
CoreStates in October rebuffed an $18 billion offer from Mellon Bank, saying that it wanted to remain independent.
Terrence Larsen, chief executive at CoreStates, said First Union was committed to CoreStates' existing customers.
"We are particularly pleased that First Union is demonstrating an unwavering commitment to the growth and vitality of the region CoreStates serves," Larsen said. "Our combined organization will enable us to leverage our expertise, products and customer relationships in a powerful new way."
As part of the deal, First Union promised to establish a $100 million foundation to enrich the region CoreStates serves, First Union said.
A merger could, however, produce some layoffs in New Jersey and Pennsylvania, where the two banks overlap, analysts said. But First Union said the marriage would create 3,000 new jobs in the greater Philadelphia area, which would offset any merger-related job cuts.
First Union also promised to set up a $16 million employee training program for workers who lose their jobs.
The combined bank would be the sixth largest in the country, with $204 billion in assets and 2,766 offices serving 16 million customers.
First Union said it anticipates an after-tax restructuring charge of $795 million in the second quarter of 1998.
Crutchfield will become chairman and chief executive of the combined bank, while Terrence Larsen, chairman and chief executive at CoreStates, will be vice chairman. Six members of CoreState's board will join First Union's board.
The merger should be finalized by April 30, 1998, First Union said.
CoreStates is based in Philadelphia, and has about 550 branches, while First Union is headquartered in Charlotte, N.C., with 1,900 branches.
Analysts said rumors of a possible deal have been circulating on Wall Street for weeks.
CoreStates' stock (CFL) rose 6-1/2, or nearly 9 percent, to 79 in trading on the New York Stock Exchange, while First Union (FTU) dropped 2-3/16, or about 4 percent, to 50-1/4.
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CoreStates
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