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SunTrust eyes legal wedge
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June 4, 2001: 6:27 p.m. ET
Proposes amending Wachovia bylaws; legal showdown begins this week
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NEW YORK (CNNfn) - SunTrust Banks Inc. proposed Monday amending Wachovia Corp.'s bylaws to allow shareholders that support its unsolicited $14.7 billion takeover bid to call a special meeting.
The proposed amendment would allow Wachovia holders of 10 percent or more of outstanding shares to hold a special meeting.
If Wachovia shareholders don't approve the merger with First Union, but do endorse the amendment, SunTrust (STI: up $0.50 to $62.10, Research, Estimates) could call a special meeting, the bank said in a statement. The meeting's purpose would be to increase Wachovia's board and to nominate persons to Wachovia's board that would be more inclined to pursue a combination with SunTrust.
The amendment is the latest attempt by SunTrust to dislodge Wachovia's $12.9 billion merger agreement with First Union Corp. (FTU: up $0.50 to $32.66, Research, Estimates). In late May, Wachovia again rejected SunTrust's $14.7 billion stock offer and chose to stay with First Union.
Atlanta-based SunTrust then sued both First Union and Wachovia in federal and state court. Wachovia and First Union then countered with their own lawsuits.
All three banks have agreed to move their court battle to North Carolina Business Court. The legal showdown between SunTrust, First Union and Wachovia will begin this week, a source told CNNfn.com.
SunTrust is challenging the stock option Wachovia granted First Union, which could be valued at a minimum of $780 million or more than $1 billion. SunTrust claims the option, even at the low valuation, "represents an egregious break-up fee relative to the size of the First Union transaction."
However, the true contest for Winston-Salem, N.C.-based Wachovia is set for Aug. 3, when Wachovia (WB: down $0.26 to $68.00, Research, Estimates) holds its annual shareholders meeting.
Shareholders will be meeting to vote on the Wachovia's planned merger with First Union and not SunTrust, said Wachovia spokesman Jay Reed. It is not known whether shareholders will consider Monday's bylaw proposal from SunTrust.
"We have received the proposal and are reviewing it for timeliness and appropriateness," Reed said.
Wachovia will decide soon — maybe in a few hours or even by Tuesday — if shareholders will be able to vote on the bylaw change, he said.
The amendment would allow shareholders to call special meetings.
"If our solicitation is successful and Wachovia does not negotiate with SunTrust, we would then seek as soon as possible to call a special meeting of Wachovia shareholders to elect directors who will be committed to pursuing a merger with SunTrust unless a more attractive alternative is then available," said SunTrust Chairman and CEO L. Phillip Humann in a statement Monday. 
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