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First Union To Buy Corestates $16.1 Billion Transaction Would Be Biggest Banking Deal In U.S. History

Wed., Nov. 19, 1997

CoreStates Financial Corp. and First Union Corp. have agreed to a $16.1 billion merger, an acquisition that would represent the largest in U.S. banking history and the latest in a frenzied consolidation of the financial world.

The merger would create a financial giant with $204 billion in assets and 2,600 branches serving 16 million people in 12 states from Florida to Connecticut. The corporation would be the nation’s sixth-largest banking company and would have the largest share of retail deposits on the East Coast.

Philadelphia would become the new company’s corporate banking center as well as a major base for the bank’s customer service operations.

First Union said it expects to bring about 3,000 jobs to the Philadelphia area, and the city would become headquarters for operations in Connecticut, New York, Delaware, New Jersey and Pennsylvania. The jobs would “significantly offset the impact of merger-related job reductions,” the companies said in a statement.

But spokeswomen for both companies would not say Tuesday how many people could lose their jobs.

“We are particularly pleased that First Union is demonstrating an unwavering commitment to the growth and vitality of the region CoreStates serves,” said Terrence A. Larsen, CoreStates chairman and chief executive officer.

“Our combined organization will enable us to leverage our expertise, products and customer relationships in a powerful new way. Together, we will be unbeatable,” he said.

First Union has agreed to exchange 1.62 shares of its common stock for each share of CoreStates common stock.

If shareholders and regulatory agencies approve the agreement, Edward E. Crutchfield, chairman and chief executive officer of First Union, would retain his duties with the new company. Larsen would become vice chairman and John Georgius would remain First Union’s president.

The merger would eclipse the nation’s previous largest, NationsBank Corp.’s $14.6 billion proposed purchase of Barnett Banks. Some $40.6 billion in commercial bank or bank holding company mergers have been announced in 1997, according to Securities Data Corp. of Newark, N.J.

The deal comes one month after CoreStates, long considered ripe for takeover, rejected an $18 billion offer from Pittsburgh-based Mellon Bank, saying it wanted to remain independent. But Larsen, facing shareholder complaints about sluggish earnings and a lack of direction, never ruled out a different merger.

Analysts said the board saw more promise in First Union than in Mellon.

“They’re looking at the long term for shareholders,” said Stephen Biggar, banking analyst at Standard & Poor’s. “They felt that First Union has much better prospects going forward.”

The new company would have the first, second or third-largest share of deposits in 21 of the 30 largest metropolitan areas on the East Coast.

“You’ve got to keep that pipeline of customers filled,” said Harold Schroeder, analyst at Keefe, Bruyette & Woods Inc. “You can continue to market very heavily in your own geographic area, but some would argue that it’s faster - certainly more expensive - but faster to go out and acquire another bank.”

xxxx Biggest bank deals Here are the top five U.S. bank deals: 1. First Union Corp. announces plans Tuesday to buy CoreStates Financial Corp. for $16.1 billion in stock. 2. NationsBank Corp. to buy Barnett Banks Inc. for $14.6 billion, announced Aug. 29, 1997. 3. Wells Fargo & Co. buys First Interstate Bancorp for $14.2 billion, completed April 1, 1996. 4. Chase Manhattan Corp. merger with Chemical Banking Corp., $13 billion, completed April 1, 1996. 5. First Bank System buys US Bancorp for $9.8 billion, completed Aug. 4, 1997.

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