First Interstate, Wells Fargo Talk
First Interstate Bancorp has resumed merger talks with Wells Fargo & Co., the hostile bidder whose all-stock offer is now worth almost $1.4 billion more than that of rival First Bank System Inc.
As the Federal Reserve opened hearings Monday on the competing offers for First Interstate, the sought-after lender announced its chairman had met over the weekend with Wells Fargo’s chief executive, Paul Hazen.
William E. B. Siart, First Interstate’s chairman, discussed the meeting in a letter released to the public. He said his board had determined reopening talks was required “by our responsibilities to shareholders, customers, employees, and the communities we serve.”
Meanwhile, First Interstate’s agreement to be acquired by First Bank System remains in place.
While First Interstate felt it had to consider the higher Wells Fargo offer, local leaders at the Fed hearing in Los Angeles reiterated concerns that merging with Wells Fargo would cost the region too many jobs and could result in a decline in charitable corporate giving.
Jobs are a concern because both banks are based in California. A merger between San Francisco-based Wells Fargo and First Interstate, based in Los Angeles, are expected to bring the elimination of thousands of jobs, most from within the state.
A merger with Minneapolis-based First Bank System would be less onerous to California since a bigger share of the job cuts would come elsewhere.
One of the harshest critics of the Wells Fargo proposal, Los Angeles Mayor Richard Riordan, acknowledged the Northern California lender’s bid had become too rich to be ignored.
But he urged the Fed to require that Wells Fargo provide a detailed accounting of the kinds of loans it would make to poor, inner-city neighborhoods under its recently announced $45 billion commitment to community lending.
Lending to inner-city neighborhoods has become an issue since bank mergers often result in the elimination of branches seen as redundant, potentially hurting areas where capital is scarce.