-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eaf3OZUldYeGc3GuagF4uBCgTe6BdtDm79Yp4IvjpKyZrvrFp/S8g4k/E5U+pXB5 il4F94BzRN4KUSaYfyPluw== 0000950168-01-500526.txt : 20010531 0000950168-01-500526.hdr.sgml : 20010531 ACCESSION NUMBER: 0000950168-01-500526 CONFORMED SUBMISSION TYPE: 425 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20010530 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: WACHOVIA CORP/ NC CENTRAL INDEX KEY: 0000774203 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 561473727 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 425 SEC ACT: SEC FILE NUMBER: 001-09021 FILM NUMBER: 1650088 BUSINESS ADDRESS: STREET 1: 100 N MAIN ST STREET 2: P O BOX 3099 CITY: WINSTON SALEM STATE: NC ZIP: 27101 BUSINESS PHONE: 3367705000 MAIL ADDRESS: STREET 1: 100 NORTH MAIN ST STREET 2: P O BOX 3099 CITY: WINSTON SALEM STATE: NC ZIP: 27101 FORMER COMPANY: FORMER CONFORMED NAME: FIRST WACHOVIA CORP DATE OF NAME CHANGE: 19910603 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FIRST UNION CORP CENTRAL INDEX KEY: 0000036995 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 560898180 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 425 BUSINESS ADDRESS: STREET 1: ONE FIRST UNION CTR CITY: CHARLOTTE STATE: NC ZIP: 28288-0013 BUSINESS PHONE: 7043746565 MAIL ADDRESS: STREET 1: ONE FIRST UNION CENTER CITY: CHARLOTTE STATE: NC ZIP: 28288-0013 FORMER COMPANY: FORMER CONFORMED NAME: CAMERON FINANCIAL CORP DATE OF NAME CHANGE: 19750522 FORMER COMPANY: FORMER CONFORMED NAME: FIRST UNION NATIONAL BANCORP INC DATE OF NAME CHANGE: 19721115 425 1 form425_58707.txt WACHOVIA CORPORATION 425 Filed by First Union Corporation Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: Wachovia Corporation Commission File No. 333-59616 Date: May 30, 2001 This filing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, (i) statements about the benefits of the merger between First Union Corporation and Wachovia Corporation, including future financial and operating results, cost savings, enhanced revenues, and accretion to reported earnings that may be realized from the merger; (ii) statements with respect to First Union's and Wachovia's plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets", "projects" and similar expressions. These statements are based upon the current beliefs and expectations of First Union's and Wachovia's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the risk that the businesses of First Union and Wachovia will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the merger on the proposed terms and schedule; (6) the failure of First Union's and Wachovia's stockholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength of the local economies in which the combined company will conduct operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on the combined company's loan portfolio and allowance for loan losses; (9) changes in the U.S. and foreign legal and regulatory framework; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the combined company's capital markets and asset management activities. Additional factors that could cause First Union's and Wachovia's results to differ materially from those described in the forward-looking statements can be found in First Union's and Wachovia's reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to First Union or Wachovia or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. First Union and Wachovia do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made. The proposed transaction will be submitted to First Union's and Wachovia's stockholders for their consideration, and, on April 26, 2001, First Union filed a registration statement on Form S-4 with the SEC containing a preliminary joint proxy statement/prospectus of First Union and Wachovia and other relevant documents concerning the proposed transaction. Stockholders are urged to read the definitive joint proxy statement/prospectus when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the registration statement and the joint proxy statement/prospectus, as well as other filings containing information about First Union and Wachovia, at the SEC's Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC filings that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to First Union, Investor Relations, One First Union Center, Charlotte, North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations, 100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397). First Union and Wachovia, and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of First Union and Wachovia in connection with the merger. Information about the directors and executive officers of First Union and their ownership of First Union common stock is set forth in First Union's proxy statement on Schedule 14A, as filed with the SEC on March 13, 2001. Information about the directors and executive officers of Wachovia and their ownership of Wachovia common stock is set forth in Wachovia's proxy statement on Schedule 14A, as filed with the SEC on March 19, 2001. Additional information regarding the interests of those participants may be obtained by reading the definitive joint proxy statement/prospectus regarding the proposed transaction when it becomes available. THE FOLLOWING PRESENTATION MATERIALS MAY BE USED FROM TIME TO TIME BY FIRST UNION IN MEETINGS OR CONFERENCES WITH ANALYSTS AND INVESTORS. [GRAPHIC] FIRST UNION WACHOVIA The New WACHOVIA Important Factors to Consider May 30, 2001 Cautionary Statement ================================================================================ This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, (i) statements about the benefits of the merger between First Union Corporation and Wachovia Corporation, including future financial and operating results, cost savings, enhanced revenues, and accretion to reported earnings that may be realized from the merger; (ii) statements with respect to First Union's and Wachovia's plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as "believes", "expects", "anticipates", "estimates", "intends", "plans", "targets", "projects" and similar expressions. These statements are based upon the current beliefs and expectations of First Union's and Wachovia's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the risk that the businesses of First Union and Wachovia will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the merger may not be fully realized or realized within the expected time frame; (3) revenues following the merger may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the merger, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the merger on the proposed terms and schedule; (6) the failure of First Union's and Wachovia's stockholders to approve the merger; (7) competitive pressures among depository and other financial institutions may increase significantly and have an effect on pricing, spending, third-party relationships and revenues; (8) the strength of the United States economy in general and the strength of the local economies in which the combined company will conduct operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on the combined company's loan portfolio and allowance for loan losses; (9) changes in the U.S. and foreign legal and regulatory framework; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on the combined company's capital markets and asset management activities. Additional factors that could cause First Union's and Wachovia's results to differ materially from those described in the forward-looking statements can be found in First Union's and Wachovia's reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed with the Securities and Exchange Commission and available at the SEC's Internet site (http://www.sec.gov). All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to First Union or Wachovia or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. First Union and Wachovia do not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made. FIRST 1 WACHOVIA UNION Additional Information ================================================================================ The proposed transaction will be submitted to First Union's and Wachovia's stockholders for their consideration, and, on April 26, 2001, First Union filed a registration statement on Form S-4 with the SEC containing a preliminary joint proxy statement/prospectus of First Union and Wachovia and other relevant documents concerning the proposed transaction. Stockholders are urged to read the definitive joint proxy statement/prospectus when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the registration statement and the joint proxy statement/prospectus, as well as other filings containing information about First Union and Wachovia, at the SEC's Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC filings that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, by directing a request to First Union, Investor Relations, One First Union Center, Charlotte, North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations, 100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397). First Union and Wachovia, and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of First Union and Wachovia in connection with the merger. Information about the directors and executive officers of First Union and their ownership of First Union common stock is set forth in First Union's proxy statement on Schedule 14A, as filed with the SEC on March 13, 2001. Information about the directors and executive officers of Wachovia and their ownership of Wachovia common stock is set forth in Wachovia's proxy statement on Schedule 14A, as filed with the SEC on March 19, 2001. Additional information regarding the interests of those participants may be obtained by reading the definitive joint proxy statement/prospectus regarding the proposed transaction when it becomes available. FIRST 2 WACHOVIA UNION Where We Are Today ================================================================================ o Nominal Offers Are Approximately Equal (a) [_] First Union's Negotiated Merger $63.68 [_] SunTrust's Hostile Offer 64.85 [_] Current Spread 1.8% o Separately, First Union's Dividend Proposal Offers You A Choice (b) [_] One-Time Cash Payment $0.48 or -- [_] Continuation of Current Wachovia Dividend $2.40 o Wachovia's Board Has Spoken [_] Reaffirmed Support For First Union Merger [_] Reviewed History With SunTrust - The Board Believes A Deal Will Not Work - --------------------------- (a) Based on May 29, 2001 closing prices. SunTrust closing stock price is adjusted by $0.40 for ex-dividend date. The $63.68 includes First Union's one-time $0.48 cash payment. Refer to page 16 in Appendix for additional information. (b) Per share of Wachovia stock exchanged, at 2-for-1 exchange ratio. See also footnote (a). Refer to page 17 in Appendix for additional information. FIRST 3 WACHOVIA UNION First Union...We Are Ready ================================================================================ o New management team in place for over a year [_] Have met earnings expectations 3 quarters in a row [_] Remain comfortable with outlook for 2nd quarter and 2001 [_] Focused on getting to second quartile of top 20 U.S. banks in terms of capital ratios [_] Created cost management culture [_] Aligned compensation with performance [_] Significantly improved external reporting o Strategic repositioning complete [_] 8 billion in assets held for sale reduced to less than $100 million today [_] Sold credit card portfolio, $13 billion in investment securities, 84 branches and mortgage servicing business o Capital Management Group [_] Faring well vs. many major competitors o Retail Bank (General Bank) [_] Increasing deposits, loans and approaching best-in-class service per Gallup o Corporate and Investment Bank [_] Managing well in tough markets [_] Comparison vs. 1999 and 2000 difficult due to high principal investing gains o Top tier market performance year-to-date [_] 14% year-to-date stock price performance [_] #2 of top 20 banks FIRST 4 WACHOVIA UNION First Union...We Are Ready ================================================================================ Merger Transition Organization In Place And Moving Forward Balanced Representation of Wachovia and First Union Management Executive Committee (B. Baker and K. Thompson) Approve key transition decisions Merger Steering Committee (B. McCoy and D. Carroll) Set overall policies Project Management Office Coordinate and oversee all transition processes and communications
Customer Experience Team Integrated Communications Culture Integration Team Progress Tracking Transition Team Conversion Task Force Manage the corporation's integration Complete all systems conversions at the business unit level All Business Units Represented All Business Units Represented
Primary Objectives: Expand Customer Base - ------------------- Stay Focused on Customer Experience Improve Customer Perception of Combined Organization FIRST 5 WACHOVIA UNION First Union...We Are Ready ================================================================================ Transition Risk Management o Risk management is key component of entire transition/execution process:
[_] Customer risk [_] Employee risk [_] Market risk [_] Systems/operations risk [_] Regulatory risk [_] Capacity/volume risk [_] Organization risk [_] Financial risk [_] Transaction risk
Key Information Tracked
Financial Customer - ------------------------------------ ------------------------------------------------------------------------------- Core Expense/Goal Net Growth vs. Baseline Commercial (Barlow) vs. Target One-Time Expense/Goal Customer Market Share vs. Target Operating Exp/Op. Rev. vs. Goal Small Business Growth vs. Baseline Operating EPS/Forecast vs. Goal At Risk Assessment vs. Target Brand Perception vs. Target Cash EPS/Forecast vs. Goal Consumer (Gallup) vs. Target Customer Perception vs. Target ChargeOffs/Avg. Loans vs. Target NPL/Loans + OREO vs. Target Human Resources Avg. Deposits/Customer vs. Baseline ------------------------------------------------------------------------------ Avg. Loans/Customer vs. Baseline Cultural Task Force % Employees Retained/Plan Revenue Growth/Forecast Meeting Milestones % Displaced in New Positions/Plan Tier I Capital vs. Target FTE Reduction/Plan Monthly Turnover/Plan Total Capital vs. Target Training Events/Plan Debt Rating vs. Target Reserves/Loans vs. Target Transition Plan Milestones Credit Losses/Avg. Loans vs. Target ------------------------------------------------------------------------------- Noncredit Losses/Avg. Loans vs. Target % Milestones Completed vs. Schedule Data Accuracy vs. Target Share Price Movement/BK Index vs. Target Call Center Service Level Data Integrity vs. Target Economic Profit Growth vs. Target Metrics vs. Target Level of Exceptions vs. Target Operating ROE vs. Target Uptime vs. Target Share Repurchases vs. Target
FIRST 6 WACHOVIA UNION First Union...We Are Ready ================================================================================ First Union's Extensive Integration Experience ---------------------------------------------- o 81 bank mergers since 1985 [_] 27 bank mergers with greater than $1 billion in assets; 13 bank mergers with greater than $5 billion in assets [_] 10 broker-dealer/investment manager acquisitions with greater than 3 million customers
30 of Those 81 Complex Bank Acquisitions 41 of Those 81 Involved Less Complex ------------------------ Bank Acquisitions Mutual Funds Involved Brokerage ---------------------- Personal Trust 10 Specialty Acquisitions 81 Acquisitions Deposits ATM Corporate Trust Involved Involved Consumer Loans Insurance ---------------------------- - ---------------------- Leasing IRA Unique System General Ledger Indirect CAP Conversions Payroll Unsecured/Secured International Examples Include: Accounts Payable Commercial Loans Sales Tracking Equity Derivative Fixed Assets CDs Credit/Debit Cards Systems Benefits Safe Deposit Box Capital Markets Investments Bond Systems Network Connectivity Overdraft Protection Capital Mgmt Investments Commercial and Customer Information Mortgage Trading Insurance Systems Systems Item Processing Account Recovery Dot coms Credit Card Cash Management Wire Transfer 401K Equity Lines Institutional Custody ACH
FIRST 7 WACHOVIA UNION First Union Is Undervalued ================================================================================ o We believe that we have one of the best business mixes and long-term growth potential among U.S. banks Earnings Contribution (a) Business Segment Normalized 3-5 Years ---------------- -------------------- Retail 35% - 40% Brokerage/Wealth Management 30% - 35% Corporate/Investment Bank & Other 25% - 30% -------------------------------------------------------- Implied Long-Term Growth Rate 10% - 12% -------------------------------------------------------- o But our shares currently trade at the low end of our peer group (b) First Union Price/Estimated 2002 Cash EPS 9.9x Peer Group Average 12.1x Rank Among Top 20 Banks 19th P/E Ratio to Estimated Earnings Growth (c) 90% Peer Group Average "PEG" 118% Rank Among Top 20 Banks 19th ----------------------------------------------------------------------- 30% Potential Upside for First Union by Simply Trading at Peer Averages ----------------------------------------------------------------------- - ------------------- (a) Refer to page 24 in Appendix for detailed information. (b) Peer group includes top 20 U.S. banks, excluding Trust and Money Center banks. Earnings per share estimates from First Call, adjusted for current intangible amortization per share. Peer group average PEG ratio assumes First Call estimated 5 year earnings per share growth as denominator. (c) Based on 11% earnings growth, midpoint of 10%-12% implied long-term growth rate range. FIRST 8 WACHOVIA UNION Wachovia Merger Remains Clearly Compelling for First Union ================================================================================ Strategic Proposition --------------------------------------------------------------- Regional Ruler with Scale National Businesses --------------------------------------------------------------- o Strengthens quality of management o Improves our business lines: Impact ------------ [] Retail Bank Strength - #1 on East Coast - Distribution (FTU sales, WB service culture) Improved - Market share Improved [] Brokerage and Wealth Management - National Scale - Product mix Improved - Distribution Improved [] Corporate/Investment Bank Scale - Stronger Mid-Market Focus - Client mix Improved - Cross-sell opportunities Improved FIRST 9 WACHOVIA UNION Wachovia Merger Remains Clearly Compelling for First Union ================================================================================ Financial Proposition o Significant earnings accretion with conservative assumptions EPS Impact --------------------- Cash New GAAP (a) ---- ------------ 2002E 3.7% 0.0% 2003E 5.3 2.5 2004E 7.1 5.4 o 20%+ internal rate of return, well in excess of cost of capital o Strong balance sheet - improves capital and reserve coverage ratios Current First Union At Closing ----------- ---------- Reserves/Loans 1.4% 1.8% Tier I Capital/Risk-Based Assets 7.2% 7.7% o Positioned to generate over $2.5 billion in excess capital per year (b) [_] After-tax cost savings contribute $550 million per annum [_] Potential revenue synergies in excess of $200 million already identified and not included in analysis ---------------------------------------------------------------------- We Believe That The Assumptions Underlying The Above Analyses Are Realistic And Achievable With Upside Potential ---------------------------------------------------------------------- - -------------------------- (a) As used herein, "New GAAP" refers to the anticipated modifications to GAAP whereby existing and newly recorded goodwill would not be subject to amortization, but rather would be subject to periodic testing for impairment. (b) Refer to page 19 in Appendix for detailed information. FIRST 10 WACHOVIA UNION SunTrust's Hostile Proposal Appears Risky For Its Shareholders ================================================================================
o We believe that SunTrust's earnings momentum has hit the wall. Analysis reveals: [_] Core earnings have not grown in the past two years [_] EPS growth has been driven by one-time gains and share repurchases [_] "Growth" businesses are stagnating [_] Projected earnings growth of 7% is at low end of peers
SunTrust's Lack of Growth Track Record(a) In Our View, SunTrust Is Overvalued - -------------------------------------------- ----------------------------------------------------- SunTrust CAGR 1Q'99 - 1Q'01: SunTrust -------------- -------------- Net Revenue 2% Current Price/2002E Cash EPS (b) 11.3x Operating Earnings 2% Projected Net Income Growth 7% Core Earnings Per Share 6% P/E Ratio to Projected Net Avg. Fully Diluted Shares (4%) Income Growth 162% Memo: - ----- Asset Management Revenues (1%) Assets Under Management 1% Note: excludes one-time gains - -------------------------------------------------------------------------- Is SunTrust's Current P/E Sustainable, With or Without This Transaction? - --------------------------------------------------------------------------
- ----------------- (a) Refer to pages 8 and 9 in First Union/Wachovia investor presentation dated May 22, 2001. (b) Earnings estimate based on First Call, adjusted to include intangible amortization. FIRST 11 WACHOVIA UNION SunTrust's Hostile Proposal Appears Risky For Its Shareholders ================================================================================ o We believe that the marginal accretion and low returns to SunTrust's shareholders generated by this transaction limits SunTrust's financial flexibility [_] Cost savings assumptions are 25%-30% above the comfort levels SunTrust discussed with Wachovia in December [_] In our view, aggressive given limited overlap - under 25% overlap of branches but cost savings total 10% of combined costs [_] Revenue opportunities limited by lack of investment management product breadth [_] Low organic earnings growth requires significant share repurchases to approach 10% EPS growth SunTrust EPS Impact New GAAP Basis Cash Basis - ------------------- -------------- ---------- 2002E (10%) 0% 2003E (4%) 3 2004E (1%) 6 o IRR to SunTrust 12%-14%, at the low end of recently announced transactions -------------------------------------------------------------------- Can SunTrust Acquire Wachovia After A Protracted Hostile Battle And Experience NO Customer and Revenue Attrition? -------------------------------------------------------------------- - ------------------- Source: SunTrust investor presentation on May 14, 2001. EPS impact and IRR assume $780 million option payment. FIRST 12 WACHOVIA UNION SunTrust's Hostile Proposal Appears Risky For Its Shareholders ================================================================================ o Pro forma risk-based capital ratios among lowest of top 50 U.S. banks [_] Transaction reduces SunTrust's "Coke adjusted" regulatory capital ratios by over 100 basis points o Capital ratio impact of unrealized gain on Coca-Cola shares owned by SunTrust is greatly diluted by transaction, and... [_] Transaction costs totaling $1.7 billion, after-tax, consume 25% of current Tier I capital [_] Aggressive projected dividend payout and share repurchases limit capital generation capability
Projected At Closing STI/WB Impact of Coca-Cola Gain Greatly Diluted - -------------------- ------ ----------------------------------------------------- Tier I Risk-Based Capital 6.5% SunTrust Current Rank Among Top 50 U.S. Banks #50 Tier I Risk-Based Capital 6.8% Adjusted for Unrealized Coke Gain 8.3% Projected 2002 Dividend Payout Rank Among Top 50 U.S. Banks #32 Ratio (New GAAP Basis) 47% Rank Among Top 50 U.S. Banks (a) #46 Pro Forma SunTrust/Wachovia Projected Dividend and Share Tier I Risk-Based Capital 6.5% Repurchases as a % of Earnings 70% Adjusted for Unrealized Coke Gain 7.2% Rank Among Top 50 U.S. Banks #46 Capital Ratio Growth Per Annum (b) 0.17% Years Before Incremental Earnings From Deal Offset Up-Front Charges 13 years
------------------------------------------------------------------- How Will SunTrust Rebuild Its Capital Base Without Impacting Its Earnings Or Its Stock Price? ------------------------------------------------------------------- - ------------------ (a) Ranked in terms of lowest dividend payout ratio to highest. (b) Represents net excess capital generated annually as a percentage of risk-based assets. Refer to pages 18-21 and 28-29 in Appendix for detailed information. FIRST 13 WACHOVIA UNION SunTrust's Hostile Proposal Appears Risky For Its Shareholders ================================================================================ If SunTrust Sells Its Coca-Cola Shares To Increase Its Bid, We Believe SunTrust's EPS Accretion, IRR, Capital Ratios and Stock Price Would Be Negatively Impacted
Assumes Increase In Offer ----------------------------------------- Current Increase With Increase Funded by Proposal Shares Coke Sale (a) ----------- ------------- ------------------- Offer Price $64.85 $69.39 $69.39 Increase In Offer -- 7.0% 7.0% Exchange Ratio 1.081x 1.157x 1.081x Coke Sale Required to Fund Increase ($BN) -- -- $2.3 (a) 2004 EPS Impact on STI - ---------------------- New GAAP (1%) (3%) (1%) Cash 6 3 5 Tier I Risk-Based Capital Ratio - ------------------------------- At Close 6.5% 6.5% 6.0% At Close (With Coke Gain) 7.2 7.2 6.0 Rank Among Top 50 Banks #46 #46 #50 Internal Rate of Return (b) 13% 12% 12% Loss of Coke Value Per Share (c) ($2.00) ($2.09) ($4.94) - -------------------------------------------------------------------------------------------- Will SunTrust Shareholders Tolerate The Loss of Its Coke Stock Investment To Fund A Dilutive Deal (d), Producing An IRR Well-Below Recent Transactions? What EPS Accretion and IRR Hurdles Would You Require In A Hostile Bid? - --------------------------------------------------------------------------------------------
- ------------------------ Note: EPS impact and IRR assume $780 million break-up fee and 7.5% cost of debt. (a) Assumes cash component funded by sale of Coca-Cola shares required to increase value received by Wachovia shareholders to $69.39. EPS impact assumes loss of dividends related to Coca-Cola shares sold. Refer to page 22 in Appendix for more detailed information. (b) Assumes 11x terminal multiple. (c) Represents loss of current SunTrust holders' share of unrealized Coca-Cola gain, as compared to pre-transaction value per share. (d) Transaction will be dilutive to SunTrust "New GAAP" EPS for at least 3 years. Refer to pages 18, 21, and 27 in Appendix for detailed information. FIRST 14 WACHOVIA UNION First Union/Wachovia: Significantly More Compelling Financially For Shareholders ================================================================================
First Union SunTrust Merger-of-Equal Hostile Proposal --------------- ---------------- EPS Impact on Wachovia - 2004E "New GAAP" 17% 3% Cash 20 9 Internal Rate of Return to Wachovia 21%+ 15%-17% Pro Forma Annual Dividend to Wachovia $2.40 $2.40 Currency Valuation Price/2002 Cash EPS 9.9x 11.3x Long-Term Earnings Growth Rate 10%-12% 7% 2002 Cash P/E Ratio to Estimated Earnings Growth 90% (a) 162% Combined Capital Position (b) Tier I Risk-Based Capital Ratio 7.7% 6.5% Risk-Based Capital Ratio Growth Per Annum 0.82% 0.17% Projected Dividend & Repurchases/ Cash Income 35% 70% Incremental Capital Breakeven (# of years) 3 13 Net Excess Capital Generated Annually ($BN) $2.3 $0.3
------------------------------------------------ Based On This Data: Which Deal Would You Prefer? ------------------------------------------------ - ---------------------- (a) Based on an 11% earnings growth rate, midpoint of implied 10%-12% long-term growth rate. (b) Refer to pages 18-20 in Appendix for additional information. FIRST 15 WACHOVIA UNION ================================================================================ Appendix ================================================================================ Treatment of First Union's One-Time Payment to Wachovia ================================================================================ o First Union's dividend alternatives for Wachovia's shareholders need to be factored in when comparing First Union's negotiated proposal with SunTrust's hostile offer o First Union's Proposal Offers Wachovia's Shareholders: 2 First Union Shares of Common Stock $63.20 One-Time Cash Payment 0.48 (a) ----------- Total Value Received $63.68 o SunTrust's Proposal: 1.081 SunTrust Shares of Common Stock $64.85 One-Time Cash Payment -- --------- Total Value Received $64.85 - ---------------------- Note: Prices as of May 29, 2001. SunTrust's closing stock price is adjusted by $0.40 for ex-dividend date. (a) Assuming the Wachovia shareholder elects to receive the one-time $0.48 payment instead of dividend equalization preferred shares. The current First Union annual dividend per share of common stock is $0.96 ($1.92 pro forma annually for one share of Wachovia common stock at the 2-for-1 exchange ratio). FIRST 16 WACHOVIA UNION Dividend Alternatives Are Economically Equivalent For First Union ================================================================================ Illustrative Example Key Assumptions --------------- o First Union/Wachovia to target cash basis dividend payout ratio of less than 33% o Common stock dividend to be increased as enhanced earnings realized o Illustrative example assumes $1.20 per share dividend ($2.40 pro forma per current Wachovia share based on 2-for-1 exchange ratio) reached by third quarter 2003 o Incremental dividend cash flows present valued based on a 13% discount rate
Hypothetical Dividend ---------------------------------- New Wachovia Cash Basis Per New Per Preferred Projected Cash Dividend Period Wachovia Shares Share (a) EPS Payout Ratio - ------ --------------- ---------------- -------------- ------------ 2001 4th Qtr $0.24 $0.06 -- 2002 1st Qtr 0.24 0.06 -- 2nd Qtr 0.26 0.04 -- 3rd Qtr 0.26 0.04 -- 4th Qtr 0.28 0.02 $3.28 31.7% 2003 1st Qtr 0.28 0.02 -- 2nd Qtr 0.28 0.02 -- 3rd Qtr 0.30 -- -- 4th Qtr 0.30 -- $3.67 31.6% ----------------- Net Present Value $0.24 ------------------------------------------------ Adjusted for 2:1 Exchange $0.48 ------------------------------------------------
- ----------------- (a) A Wachovia shareholder electing to receive the dividend equalization preferred shares will not also receive the $0.48 cash payment. FIRST 17 WACHOVIA UNION First Union/Wachovia Should Produce Significantly Higher Capital Ratios ================================================================================ Illustrative Example
($ in billions) First Union/Wachovia SunTrust/Wachovia -------------------- ----------------- Current Tier I Equity $14.5 $6.8 Earnings to Close Less Share Buybacks 1.0 0.4 Wachovia - Other Tier I (Trust Capital Securities,etc.) 0.9 0.9 Equity Issued In Transaction (a) 11.9 12.1 New Intangibles (7.9) (8.6) -------------------- ----------------- Pro Forma Tier I Capital $20.4 $11.6 ------------------------------------------------------------------------------------------------------- Tier I Risk-Based Capital Ratio 7.7% 6.5% ------------------------------------------------------------------------------------------------------- Memo: Calculation of New Intangibles ------------------------------------ Wachovia Common Equity $6.9 $6.9 Earnings to Close Less Share Buybacks (0.2) (0.2) Wachovia Intangibles (1.5) (1.5) After-Tax Restructuring Charge (1.2) (1.7) -------------------- ----------------- Adjusted Tangible Common Equity $4.0 $3.5 Transaction Value (a) 11.9 12.1 -------------------- ----------------- New Intangibles $7.9 $8.6
- ----------------------------- a) Assumes 186.7 million shares outstanding at close and stock prices as of May 29, 2001. FIRST 18 WACHOVIA UNION First Union/Wachovia Should Generate Significantly More Excess Capital ================================================================================ Illustrative Example
2002E ------------------------------------------------- ($ in billions) First Union/Wachovia SunTrust/Wachovia -------------------- ------------------ Capital Generated By: --------------------- Pro Forma Net Income (Estimated) $3.9 $2.2 Efficiencies 0.3 0.1 Core Deposit Amortization 0.3 0.3 -------------------- ------------------ Cash Earnings $4.5 $2.6 Capital Utilized For: --------------------- Pro Forma Dividends ($1.5) ($1.1) Share Repurchases (0.1) (0.7) Fund Assumed 6% Loan Growth (0.7) (0.5) -------------------- ------------------ Net Excess Capital Generated (a) $2.3 $0.3 Dividends & Repurchases As a % of Cash Earnings 35% 70% Net Excess Capital As a % of Cash Earnings 51% 11% Risk-Based Capital Growth Per Annum (b) 0.82% 0.17%
- ---------------------- (a) First Union/Wachovia and SunTrust/Wachovia net excess capital generated would total $2.5 billion and $0.5 billion annually, respectively, if full efficiencies are assumed. (b) Represents net excess capital as a percentage of risk-based assets. FIRST 19 WACHOVIA UNION First Union/Wachovia Should Generate Incremental Capital At A Quicker Pace ================================================================================
($ in billions) First Union/ SunTrust/ Wachovia Wachovia ------------ ------------ After-Tax Cash Restructuring Charges $0.90 $0.65 Break-Up Fee -- 0.78 ------------ ------------ Total Up-Front Charges (a) $0.90 $1.43 Projected Fully-Realized After-Tax Cost Savings $0.55 $0.31 Less: Common Stock Dividend Increase (b) -- (0.19) ------------ ------------ Annual Incremental Capital $0.55 $0.12 Up-Front Charges/Incremental Capital 1.6x 12.0x Years Before Incremental Capital Offsets Up-Front Charges 3 13
- ------------------------ (a) Excludes $450 million reserve addition for both companies. (b) Run-rate: 2004 and beyond. FIRST 20 WACHOVIA UNION Impact to SunTrust's Value Per Share Embedded In Its Coca-Cola Investment ================================================================================ Illustrative Example ($ in billions, except per share data)
- --------------------------------------- Coca-Cola Shares Owned (M) 48.3 Market Price (a) $48.34 Pre-Tax Unrealized Gain ($B) $2.33 Sell 100% of Coca-Cola After-Tax Unrealized Gain ($B)(b) $1.44 Current Prosposal Shares to Build Capital - --------------------------------------- ------------------------------ ------------------------------------- Pro Forma Pro Forma Proposal Stand-Alone STI/WB Stand-Alone STI/WB - -------- ----------- ----------- ----------- ------------- Per Share Offer $64.85 $64.85 $64.85 $64.85 Investment in Coke - ------------------ Investment to be Sold -- -- $1.44 $1.44 After-Tax Unrealized Gain Remaining $1.44 $1.44 $0.00 $0.00 ----------- ----------- ----------- ------------- $1.44 $1.44 $1.44 $1.44 Dilution to STI Shareholders - ---------------------------- STI Shares Outstanding 291.8 488.9 291.8 488.9 Unrealized Coke Gain Per Share $4.94 $2.95 $0.00 $0.00 - ------------------------------------------------------------------------------------------------------------------------- Dilution to Current STI Holders -- ($2.00) ($4.94) ($4.94) - ------------------------------------------------------------------------------------------------------------------------- Capital - ------- Tier I Capital $6.8 $11.6 $6.8 $11.6 Proceeds from Coke Sale -- -- 1.4 1.4 ----------- ----------- ----------- ------------- Adjusted Tier I Capital $6.8 $11.6 $8.2 $13.0 - ------------------------------------------------------------------------------------------------------------------------- Pro Forma Risk Based Tier I Capital Ratio 6.8% 6.5% 8.3% 7.2% Rank Among Top 50 Banks #49 #50 #32 #46 - -------------------------------------------------------------------------------------------------------------------------
- -------------------------- (a) As of May 29, 2001. (b) Assumes 38% tax rate. FIRST 21 WACHOVIA UNION Impact to SunTrust Of Selling Coca-Cola Shares To Fund Increase In Bid ================================================================================
Current Illustrative Increase In SunTrust Proposal In Cash Proposal Funded By Coca-Cola Share Sale -------- ------------------------------------------------------ Implied Offer to Wachovia $64.85 $66.80 $68.09 $69.39 Differential From Current Proposal -- 3.0% 5.0% 7.0% Realized Gain In Coca-Cola Shares Sold ($MM) $619.0 $1,030.0 $1,441.0 % of Total Coca-Cola Investment 43.0% 71.5% 100.0% Calculation of Components of Proposal - ------------------------------------- Value of STI Shares (ex. Coke) (a) $61.66 $61.66 $61.66 $61.66 Value of Coke In STI Shares Received (b) 3.19 1.82 0.91 0.00 Cash (c) 0.00 3.32 5.52 7.72 ------- ------- --------- -------- Total Consideration $64.85 $66.80 $68.09 $69.38 Tier I Capital Calculation ($BN) - -------------------------------- Pro Forma Tier I Capital $11.6 $11.6 $11.6 $11.60 Unrealized Coca-Cola Gain 1.4 0.8 0.40 0 Incremental Intangibles 0.0 (0.4) (0.6) (0.8) ------- ------- --------- -------- Adjusted Tier I Capital $13.0 $12.0 $11.4 $10.7 Tier I Risk-Based Capital Ratio (As Reported) 6.5% 6.3% 6.1% 6.0% Tier I Risk-Based Capital Ratio (With Coke) 7.2 6.7 6.3 6.0 Rank Among Top 50 U.S. Banks #46 #50 #50 #50 Component Valuation of STI Shares - --------------------------------- Unrealized Coke Gain Per Share $2.95 $1.68 $0.84 $0.00 Loss In Value Per STI Share (d) ($1.27) ($2.11) ($2.95) Memo: Current STI Market Price $59.99 "Core" Value Per STI Share (e) $57.04
- ----------------------------- (a) Represents "core" value per SunTrust share multiplied by 1.081 exchange ratio. (b) Represents unrealized Coke gain per SunTrust share multiplied by 1.081 exchange ratio. (c) Represents unrealized gain in Coca-Cola shares sold per estimated 186.7 million Wachovia shares at close. (d) Represents decline in unrealized Coke value per SunTrust share as compared to value per share in current proposal. (e) Represents current SunTrust price less unrealized Coke gain per SunTrust share. FIRST 22 WACHOVIA UNION First Union/Wachovia Produces Far Superior Wealth Management Franchise ================================================================================ o First Union: National scale in highly valued Wealth Management businesses o SunTrust: Low growth and, we believe, inadequate scale to compete effectively
Stand-Alone ------------------------- Scale First Union/ SunTrust/ Scale First Union SunTrust Gap Wachovia Wachovia Gap ------------ --------- ---------- ------------- ---------- ------- $171 $92 1.9x Assets Under Management ($BN) $222 $142 1.6x $87 $20 4.4x Mutual Fund AUM ($BN) $98 $31 3.2x #20 #50 Rank Nationally #17 #41 536 11 48.7x Brokerage Offices 600 75 8.0x 7,779 103 75.5x Registered Representatives 8,350 674 12.4x #6 NM Rank Nationally #6 >#30 # of Private Client/High Net Worth 76 0 NM Offices 133 57 2.3x Historical Growth Rate in 28% (1%) NM Wealth Management Revenue (a)
- -------------------- (a) Represents compound annual growth in standalone FTU and STI revenue since 1st quarter of 1999. Includes impact of EVEREN transaction for First Union. FIRST 23 WACHOVIA UNION First Union/Wachovia Business Mix Produces Far Superior Growth Potential ================================================================================ o First Union: We believe our franchise has higher growth business mix o SunTrust: Traditional retail bank and corporate lender
Net Income Contribution --------------------------------------------- First Union/ SunTrust/ Wachovia Wachovia(b) Long-term --------------------------- -------------- Growth Rate 3-5 Year Business Segment of Business (a) 2001E Normalized - ----------------- --------------- ----------- ------------ Retail 8% 46% 35%-40% 66% Brokerage/Wealth Management 15 21 30-35 11 Corporate/Investment Bank & Other 10 33 25-30 23 Implied Long-Term Growth (c) 10% 11%+ <9%
- --------------------------------------- (a) First Union 5 year growth estimates by business line. (b) Estimated as per March 31, 2001 10Q financial statements. (c) Based on net income contribution and First Union growth estimates by business line. FIRST 24 WACHOVIA UNION
First Union/Wachovia Produces Far Superior Retail & Corporate/Investment Banking Franchise ===========================================================================================
o First Union/Wachovia: Creates #1 retail bank on the East Coast First Union/ SunTrust/ Scale Wachovia Wachovia Gap ------------ ---------- ------- Customers (MM) 19 8 2.4x Branches (a) 2,900 1,800 1.6x ATMs 5,128 3,347 1.5x On-line Banking Customers (MM) 3 1 3.0x States of Operation 13 9 1.4x Metropolitan Areas 75 58 1.3x Southeastern Deposits ($BN) (b) $98 $79 1.2x Metropolitan Areas Ranked 1 or 2 Deposits ($MM) $115 $63 1.8x Cumulative % of Total 78% 73% o First Union/Wachovia: Creates mid-market capital markets scale o SunTrust: We don't believe that Robinson Humphrey provides required scale. Moreover, it is not integrated with SunTrust's corporate banking business - --------------------------------------- (a) Pre-divestitures. (b) Excludes home office branch deposits. FIRST 25 WACHOVIA UNION SunTrust's Hostile Proposal Appears Risky For Its Shareholders ================================================================================ o Hostile deals in the U.S. banking industry have a poor history [_] No "successful" completed hostile deal in more than a decade [_] Only completed transaction - Wells Fargo/First Interstate -Substantial customer disruption and deposit run-off, particularly in non-California, non-overlap markets -Substantial attrition of acquired senior management -Significant earnings shortfall
Wells Fargo Experience Similarities in WFC and STI Proposals - ---------------------------------------------- --------------------------------------------------------- WFC STI ------- ------- Deposit Run-off: Total (a) 16% Deal Nature Hostile Hostile Deposit Run-off: Non-California (a) 35% # of $1B+ Asset Integrations 1 1 % of Top 50 First Interstate in Previous 10 Years Management Choosing to Remain 0% Acquired Assets as a % of 105% 73% Earnings Shortfall (b) 30%+ Current Assets % of Acquired Deposits Out 57% 51% of Footprint (c)
-------------------------------------------------------------- What Are the Implications for Shareholders if STI's Experience Is the Same? -------------------------------------------------------------- - ------------------ (a) Data represents % change for deposits from closing through 6/98, two years after closing. (b) Reported income for 1997 and 1998 as compared to Wells Fargo estimated at time of merger. (c) Represents % of non-California deposits for First Interstate and North and South Carolina deposits for Wachovia. FIRST 26 WACHOVIA UNION
Top Ten Reasons Why We Believe First Union/Wachovia Is Better For Wachovia Shareholders =======================================================================================
In Our Opinion: 1) We have a stronger business mix 2) We will grow faster 3) We will be better capitalized 4) We believe our stock has more upside potential 5) We are offering greater long-term share value (higher IRR) 6) We know how to put companies together 7) We will provide enhanced dividends 8) We're friendly, not hostile 9) We make customers our top priority 10) We care about our communities We've Reached Our Conclusion, and We Hope You Have, Too. - -------------------------------------------------------- ---------------------------------------------------------------- First Union and Wachovia - We Believe We Are the Better Company ---------------------------------------------------------------- FIRST 27 WACHOVIA UNION Top 50 U.S. Banks: Tier I Risk-Based Capital Ratio ================================================================================ Tier 1 Risk Based Capital Ratio (a) ----------------- 1) Investors Financial Services 15.80 % 2) Mercantile Bankshares 15.76 3) State Street Corporation 13.30 4) Fifth Third Bancorp 13.03 5) North Fork 12.89 6) Pacific Century Financial 12.84 7) First Virginia Banks 12.58 8) Commerce Bancshares 12.23 9) Valley National Bancorp 11.75 10) Synovus Financial Corp. 11.67 11) Commerce Bancorp, Inc. 10.90 12) Popular, Inc. 10.63 13) UnionBanCal Corporation 10.49 14) Centura Banks, Inc. 10.30 15) National Commerce Financial Corp. 10.29 16) Banknorth Group, Inc. 10.27 17) Northern Trust Corporation 10.10 18) Marshall & Ilsley Corporation 10.08 19) TCF Financial Corporation 10.04 20) Hibernia Corporation 9.96 21) Associated Banc-Corp 9.69 22) BB&T Corporation 9.20 23) FirstMerit Corporation 9.14 24) BancWest Corporation 9.10 25) Zions Bancorporation 9.05 26) First Tennessee National Corporation 8.72 Tier 1 Risk Based Capital Ratio (a) ----------------- 27) J.P. Morgan Chase & Co. 8.70 % 28) PNC Financial Services Group, Inc. 8.70 29) Citigroup, Inc. 8.56 30) Union Planters Corporation 8.55 31) Bank of New York Company, Inc. 8.42 32) Compass Bancshares, Inc. 8.15 33) FleetBoston Financial Corporation 7.96 34) Regions Financial Corporation 7.93 35) Bank One Corporation 7.80 36) Wachovia Corporation 7.80 37) Wilmington Trust Corporation 7.74 First Union/Wachovia 7.70 38) AmSouth Bancorporation 7.69 39) Bank of America Corporation 7.65 40) KeyCorp 7.54 41) SouthTrust Corporation 7.53 42) Comerica Incorporated 7.46 43) M&T Bank Corporation 7.41 44) U.S. Bancorp 7.40 45) Wells Fargo 7.30 46) Huntington Bancshares 7.20 47) First Union 7.16 48) National City 7.04 49) SunTrust Banks 6.85 50) Mellon Financial 6.71 SunTrust/Wachovia 6.50 (a) As of March 31, 2001, except National Commerce data as of December 31, 2000. FIRST 28 WACHOVIA UNION Top 50 U.S. Banks: Tier I Risk-Based Capital Ratio ================================================================================ 2002E Dividend Payout Ratio (a) ---------------- 1) Investors Financial Services Corp. 4.0 % 2) State Street Corporation 15.9 3) Citigroup, Inc. 16.1 4) M&T Bank Corporation 18.1 5) Commerce Bancshares, Inc. 19.4 6) Zions Bancorporation 19.5 7) Northern Trust Corporation 23.2 8) Banknorth Group, Inc. 24.6 9) Wells Fargo & Company 26.3 10) Bank One Corporation 27.5 11) Bank of New York Company, Inc. 27.6 12) Fifth Third Bancorp 27.9 13) Marshall & Ilsley Corporation 28.1 14) UnionBanCal Corporation 28.1 15) J.P. Morgan Chase & Co. 30.0 16) SunTrust Banks, Inc. 30.1 17) First Union Corporation 30.3 18) Popular, Inc. 30.5 19) SouthTrust Corporation 30.5 20) National Commerce Financial Corp. 30.6 21) BancWest Corporation 31.0 22) Hibernia Corporation 31.5 23) BB&T Corporation 31.9 24) FleetBoston Financial Corporation 31.9 25) Comerica Incorporated 32.2 26) Pacific Century Financial Corporation 32.3 2002E Dividend Payout Ratio (a) ---------------- 27) TCF Financial Corporation 32.7 % 28) Commerce Bancorp, Inc. 32.8 29) Centura Banks, Inc. 33.8 30) Mellon Financial Corporation 34.1 31) U.S. Bancorp 34.1 32) Mercantile Bankshares Corporation 34.4 First Union/Wachovia 34.9 33) PNC Financial Services Group, Inc. 36.0 34) North Fork Bancorporation, Inc. 37.1 35) First Tennessee National Corporation 37.4 36) Bank of America Corporation 37.8 37) Compass Bancshares, Inc. 38.1 38) First Virginia Banks, Inc. 41.4 39) Synovus Financial Corp. 41.4 40) Associated Banc-Corp 42.0 41) Regions Financial Corporation 42.1 42) FirstMerit Corporation 42.4 43) Wachovia Corp. 42.6 44) Wilmington Trust Corporation 43.3 45) KeyCorp 44.0 46) National City Corporation 44.4 SunTrust/Wachovia 46.6 47) AmSouth Bancorporation 50.9 48) Union Planters Corporation 51.6 49) Valley National Bancorp 51.8 50) Huntington Bancshares Incorporated 56.7 - --------------------------------------- (a) New GAAP basis. Earnings estimates based on First Call, adjusted for current intangible amortization per share run rate for each institution. FIRST 29 WACHOVIA UNION -----END PRIVACY-ENHANCED MESSAGE-----