Filed by SunTrust Banks, Inc.
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. 1-9021
Date: July 18, 2001
The following is a transcript of an investor conference call held on July
16, 2001.
OPERATOR: This conference call 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 a merger between SunTrust and Wachovia Corporation, including
future financial and operating results, cost savings and accretion to
reported and cash earnings that may be realized from such merger; (ii)
statements with respect to SunTrust'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 SunTrust'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 businesses of SunTrust and Wachovia
may 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, including, without limitation,
difficulties in maintaining relationships with employees, customers,
clients or suppliers, may be greater than expected following the merger;
(5) the regulatory approvals required for the merger may not be obtained on
the proposed terms or on the anticipated schedule; (6) the failure of
SunTrust's and Wachovia's stockholders to approve the merger; (7)
competitive pressures among depository and other financial institutions may
increase significantly and may 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 SunTrust's
results to differ materially from those described in the forward-looking
statements can be found in SunTrust'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 SunTrust or any person acting on its behalf are
expressly qualified in their entirety by the cautionary statements above.
SunTrust does 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.
On May 14, 2001, SunTrust delivered a merger proposal to the Board of
Directors of Wachovia. Subject to future developments, SunTrust intends to
file with the SEC a registration statement at a date or dates subsequent
hereto to register the SunTrust shares to be issued in its proposed merger
with Wachovia. Investors and security holders are urged to read the
registration statement (when available) and any other relevant documents
filed or to be with the SEC, as well as any amendments or supplements to
those documents, because they contain (or will contain) important
information. Investors and security holders may obtain a free copy of the
registration statement (when available) and such other documents at the
SEC's Internet web site at www.sec.gov. The registration statement (when
available) and such other documents may also be obtained free of charge
from SunTrust by directing such request to: SunTrust Banks, Inc., 303
Peachtree Street, N.E., Atlanta, GA 30308, Attention: Gary Peacock
(404-658-4753).
Now then, good afternoon, ladies and gentlemen, and welcome to the SunTrust
Bank conference call. At this time all participants are in a listen-only
mode. Later we will conduct a question and answer session and instructions
will follow at that time. If anyone should require assistance during the
call, please press the star followed by the zero on your touchtone phone.
As a reminder, ladies and gentlemen, this conference is being recorded.
I would now like to introduce your host for today's conference, Mr. Gary
Peacock with SunTrust Bank. Please go ahead, sir.
GARY PEACOCK, DIRECTOR OF INVESTMENT RELATIONS/CORPORATE COMMUNICATIONS,
SUNTRUST: Thank you. Good afternoon and welcome to our call to update you
on SunTrust's proposal to acquire Wachovia. We appreciate your joining us.
I'm Gary Peacock, Head of Investor Relations and Corporate Communications
for SunTrust. With me is Phil Humann, SunTrust's Chairman, President, and
CEO; John Spiegel, SunTrust's Vice Chairman and Chief Financial Officer and
Ted Hoepner, SunTrust's Vice Chairman of Technology, Legal, Human Resources
and Credit Quality. John Clay, SunTrust's Vice Chairman of Geographic
Banking and Corporate Investment Banking, is not with us today as he is
away on business. Jim Wells, SunTrust's Vice Chairman of Business Line,
Strategy and Marketing, is not with us today as he is meeting with Wachovia
shareholders.
In our call this afternoon, Phil Humann will first make his comments then
we will open the lines for a quick question and answer session.
Finally, our lawyers have asked me to remind you that any forward looking
statements made during the presentation are subject to risks and
uncertainties. Factors that could cause our results to differ materially
from any forward looking statements are set forth in our public reports
filed with the SEC including our filing of this presentation under Rule 425
of the Securities Act of 1933. With that, let me turn it over to Phil
Humann. Phil.
PHIL HUMANN, CHAIRMAN, PRESIDENT AND CEO, SUNTRUST: Thanks, Gary, and good
afternoon everybody and we particularly appreciate you joining us for a few
minutes this afternoon on a day that I know for many of you is quite busy
with the release of earnings of other institutions. So we'll try to make
this as quick as possible. As you know, we issued a press release early
this morning and the purpose of this call is simply to provide a context
for that release and more broadly to step back for a bearing check on our
Wachovia bid now that earnings releases are behind us and we really enter
the home stretch, looking towards August 3rd. We don't have a presentation
for you to follow and I don't have too much in the way of formal remarks so
we will have time to get to your questions.
Now since the proxies have come out there have been no shortage of
communications. Dueling press releases, competing ads, multiple mailings,
shareholder meetings in a variety of locations, lots of telephone calls
from both sides. I know this is the way these things are done but sometimes
I think the volume of communication can actually obscure what at the end of
the day is a fairly simple choice for Wachovia shareholders. Should you
vote against or for the First Union merger? We think you should vote
against because SunTrust has made a superior offer and in any event the
number of First Union shares you are being offered for your Wachovia shares
does not compensate you in our minds for the additional risk of owning
First Union stock.
So one of my goals today is to cut through the noise, if you will, and to
try to focus attention over the next few weeks on what we believe are the
real issues in this contest. That was our impetus for our release this
morning. Although we have said from day one that we would not raise our
bid, there was persistent speculation to the contrary, speculation that
diverted attention from the merits of our proposal. So today we've
reiterated again what we've been saying all along, that our offer of 1.081
shares is our best and final offer. Now let me be clear, "best and final"
means just that, best and final offer. That means no change in the exchange
ratio, no new cash, no pass through of Coke shares, no sale of Coke stock
to pay more cash. Best and final, period, bottom line, end of story.
We also reiterated our hope and intent that if we are successful in our
litigation to invalidate the deal protection features of the First Union
deal, that we would be able to write a check for the $440 million included
in our original investment presentation to Wachovia shareholders instead of
to First Union. That check would be approximately $2.16 per share in cash.
Again, not a new announcement and certainly not new money.
But I want to confirm what we've already said so as to reduce the
possibility of any future misunderstanding at all regarding our intent as
to price. We're also doing this for the SunTrust shareholder for whom we
work. The speculation in the market as to whether we would raise our price
has put pressure on our stock and we think the SunTrust shareholders will
benefit from eliminating that overhang. As you know, we've been on the road
a lot talking to a lot of large institutional shareholders, some of whom
have observed and many analysts have echoed that SunTrust stock is a good
value at current prices. However, these institutions did not want to buy
our stock in advance of a possible increase in our offer for Wachovia. So
folks, now's your chance, there will be no increase in price to Wachovia so
we believe now is the time to buy.
We've also been talking to Wachovia individual shareholders these past few
weeks and a number of specific issues have surfaced. Price is an issue to
be sure and the reality is that we do have the better price. But in
addition, we find people want to talk about other things, for instance
dividends. It turns out this is really a big deal. The issue is simplicity
versus complexity and prospects for growth versus a question mark.
Stockholders are well aware that we've increased our dividend every year
for 16 years while First Union recently cut theirs in half.
We've also been hearing from individual shareholders about currency. The
issue here is the long term track record of performance versus short term
recovery from a low base and looked at over a very short period of time.
They also are concerned about risk. First Union's aggressive appetite for
risk is inconsistent with many Wachovia shareholders investment goals.
Merger integration claims. What are the differences in terms of cost
cutting, branch closings and employee layoffs and what does it really mean
for a smooth merger integration? Our position on all of these issues are
spelled out in our various presentations, and we as always believe the
facts speak for themselves and support our proposal.
By the way, we'll be filing another presentation tomorrow and thankfully
from your perspective not having a conference call, which frames the issues
for Wachovia shareholders within the context of the most recent earnings
announcements.
There's one other issue that comes up. We talk about it in our ads and
frankly don't pull any punches. The issue is trust. Our question for
Wachovia shareholders quite simply is whether they really have grounds to
trust First Union's promises when it comes to this merger. As we see it,
First Union employs an awful lot of projections and promises when it comes
to future growth expectations upon which their financial case is based, on
everything from dividend growth to revenue expectations. The problem is,
however, based on their past performance their projections aren't
supportable by fact. Of course, their response is to distance themselves
from the past and talk about new management and new momentum, momentum I
might add that at best is one quarter old. I just wonder if Wachovia
shareholders will really buy that.
Now this is not about bashing First Union as an institution, they have
great people trying to do a good job. But we do believe we've raised
legitimate and necessary questions for Wachovia shareholders to consider.
Because they are voting on a proposal which will force them to trade in
their Wachovia stock for First Union's, in a deal that may be labeled as a
merger of equals but in fact is nowhere close to one as Wachovia
shareholders will wind up owning less than 29% of the combined company. So
we think trust matters. I'll also note that long before SunTrust came on
the scene, the original low premium First Union/Wachovia deal was met with
widespread skepticism. After we launched our proposal, they tried to
correct obvious problems with their deal, the CEO's supplemental retirement
package, the dividend, the break up fee cap. The point is that when pushed,
First Union admitted to deficiencies in the deal they cooked up. Again, a
matter of trust.
Now there also was their stealth move to change the North Carolina law to
prevent shareholders from calling a special meeting at any time for any
purpose. We think this all adds up to a pattern, a pattern that we believe
will make Wachovia shareholders uncomfortable with the prospect of owning
First Union stock. Now since May 14th our story and our proposal haven't
changed. We continue to believe that a SunTrust Wachovia combination is the
one that makes the most sense. We believe that in these last few weeks
leading up to August the 3rd, it's time for Wachovia shareholders to cut
through the clutter, speculation and hype and focus on the facts - the
relative merits of SunTrust's proposal versus First Union's. Hopefully our
release this morning and this call will help to clear the air to make it
easier for that to happen.
That concludes my remarks, and Gary, we can just open it to questions.
GARY PEACOCK: Yes. Jenny, would you please open the call for questions?
OPERATOR: Thank you, sir. Ladies and gentlemen, at this time if you have a
question you will need to press the one on your touchtone phone and you
will hear a tone acknowledging your request. Your questions will be taken
in the order that they are received. If your question has already been
answered you may remove yourself from queue by pressing the pound key. In
addition, if you are using a speakerphone, please pick up your handset
before pressing the button. One moment for the first question.
Nancy Bush of Ryan Beck & Company, please go ahead with your question.
NANCY BUSH: Good afternoon, Phil. Could you give us a preview of what
you're going to be saying as far as the differences that you saw in the
second quarter results in the two companies?
GARY PEACOCK: Nancy, rather than getting into that today, that will be
filed as part of our presentation to the Institutional Shareholder Services
tomorrow. It will be filed with the SEC and we can talk to you about that
once that document is filed.
NANCY BUSH: Can you tell us when you expect a result from the Shareholder
Services? When they'll be making their recommendations to shareholders?
GARY PEACOCK: They have not passed through a completion time for their
analysis. However, in cases similar to this we would expect an answer and a
recommendation by the end of the week. So end of the week, early part of
next week at the latest.
NANCY BUSH: Okay. Can you also tell us if you have any sense when you might
be receiving a judgment from the Business Court in North Carolina?
GARY PEACOCK: Again, we don't know. The case begins tomorrow. It would be
improper for us to speculate on how long it will take the judge to render a
decision or an opinion so we don't have an answer there for you, Nancy.
NANCY BUSH: Thank you.
OPERATOR: Kate Bleecher, Sandler O'Neill, please go ahead.
KATE BLEECHER: Thank you. I guess to further follow up on Nancy's last
question. Do you think though the Court would give you an opinion before
the August 3rd deadline of the voting?
GARY PEACOCK: The judge is sensitive to the August 3rd date although to
speculate on whether the judge will render an opinion prior to August 3rd
would be inappropriate for us to make that.
KATE BLEECHER: Okay and also do you have any sort of indication from your
proxy solicitation firm how the vote is going?
GARY PEACOCK: Well, there are specific SEC rules, Kate, that don't allow us
to speculate on the outcome. So unfortunately we're getting a lot of
questions that we can't answer today.
KATE BLEECHER: Okay, well it just helps sometimes to ask them anyway.
GARY PEACOCK: Well, let me tell you that as we've said before, we believe
we have a superior offer that'll be recognized by the Wachovia
shareholders. So obviously we're talking to shareholders all along. They
like what they're hearing as Phil covered. They like our currency. They
like our dividend proposal. The institutional shareholders should be more
comfortable with price, especially today given our announcement not to
raise our bid for Wachovia. So we're hearing good things for the
shareholders and that should help us as we move forward with this proxy
solicitation process.
KATE BLEECHER: Well clearly it's having a beneficial impact today given
your stock movement versus the group, so I commend the announcement.
GARY PEACOCK: Jenny, next question?
OPERATOR: Jennifer Thompson of Putnam Level Securities, please go ahead
with your question.
JENNIFER THOMPSON: Hi, good afternoon. My question is are you guys aware of
any of the history of the ISS voting against any potential deal? And I
guess I'm just trying to get a sense of where there were any instances
specifically where they voted against the deal and why and what maybe
parallels could you draw to this instance?
PHIL HUMANN: Jennifer, this is Phil. We're probably not going to be as
cooperative today as you all would like. You're asking us some questions
that cause us to speculate on the actions of others over which we have no
control. So we do have our meeting with ISS set up, we're looking forward
to it and we expect to have a good meeting with them and as Gary said we
expect an opinion from them by the end of the week or the first of next
week.
JENNIFER THOMPSON: Okay, thanks.
GARY PEACOCK: Jenny, next question.
OPERATOR: Jim Luke of BBMT Asset Management, please go ahead with your
question.
JIM LUKE: How much Coca Cola value dilution will be suffered by current
shareholders?
GARY PEACOCK: The proportion of the combined organization that Wachovia
shareholders will receive is about 44%. So those shareholders -Wachovia
shareholders- will in essence own 44% of our Coke stock which is 48.3
million shares at today's price. It's about $2.2 billion and they'll
receive 44% of that.
JIM LUKE: Do you have a feel for the per share amount? That's what I was
looking for. I can calculate it if you don't, that's fine.
GARY PEACOCK: It's about $2.00 to $2.25 of dilution.
JIM LUKE: Okay. Thank you.
GARY PEACOCK: Jenny, next question.
OPERATOR: Once again, ladies and gentlemen, if you do have a question
please press the one at this time. One moment, please.
GARY PEACOCK: Jenny, if there are no other questions, I think we'll just
adjourn the meeting.
OPERATOR: Mike Mayo of Prudential Securities, please go ahead.
MIKE MAYO: Good afternoon.
GARY PEACOCK: Hey, Mike.
MIKE MAYO: I just want to understand, when you try to buy a condo in New
York City, a lot of times you hear "best and final offer" and then you
realize well, maybe it's not the best and final offer after all. So just,
is this legally binding, what you're saying today or is this basically
putting all your credibility on the line as a company? And then how long
when you say that it's your best and final offer are your really referring
between now and August 3rd or assuming that the deal is voted down and then
I'll create a scenario. Deutsche Bank moves in, would you still not
increase the offer then? If you could give a little bit more color as to
the meaning behind what you're doing today.
PHIL HUMANN: Mike, this is Phil. Since we're not on video I can't ask you
to read my lips but best and final means just that. I don't know, I have no
clue what the legal implications are, I would say that our credibility is
on the line and we mean it's best and final. Again, there's nothing more to
this story than that.
MIKE MAYO: And as far as how long you mean it for, is it between you buying
Wachovia, is that between now and August 3rd or between now and the next
year?
PHIL HUMANN: Well Mike, we had not thought of it in terms of a timeframe.
It is simply best and final and if anything ever spoke for itself I think
that terminology does.
MIKE MAYO: All right. I think that's clear. Thanks.
OPERATOR: Tim Wallach of Halcyon, please go ahead with your question.
TIM WALLACH: Good afternoon. In your press release, you state that if you
won the litigation with regards to the break up fee, you would pay
shareholders $440 million in cash. Is that the maximum you will pay? I
mean, is there a possibility that you could actually win a judgment that
would entitle you to more? Or are you only going to seek that portion of
the breakup fee that would amount to at most $440 million?
PHIL HUMANN: We are seeking to overturn and invalidate the breakup
provision including the cross-option agreement. The $440 million is the
amount of money that we included in our original investor presentation and
it is the amount of money that would allow us to stay within the bounds of
the financial analysis that we presented on May 14th. So there is no new
money in the transaction from a financial modeling standpoint; it's simply
the number that we used on the May 14th presentation.
TIM WALLACH: But the way I calculate it at these prices, the option might
indeed be worth more than $440 million in cash.
PHIL HUMANN: Well, our agreement to pay the $440 million in cash is subject
to being successful in the litigation which would invalidate the deal
protection feature.
TIM WALLACH: But you would pay no more to shareholders than the $440
million?
PHIL HUMANN: That's correct.
TIM WALLACH: Under any circumstances?
PHIL HUMANN: That's correct.
TIM WALLACH: Thank you.
OPERATOR: Our last question comes from John Coffey of the Dickie Group.
Please go ahead, sir.
JOHN COFFEY: Yes. Phil, is this offer contingent upon any additional due
diligence? Or to put it another way, when I analyze Wachovia's second
quarter earnings, I thought that their outlook had worsened and how do you
guys think about what they'll look like at the time of closing if you're
successful versus when you first made the initial offer?
PHIL HUMANN: Yes, John, if you go back to our May 14th proposal it is
conditioned upon, I believe we used the terminology update and completion
of due diligence, so the answer to your question is yes.
JOHN COFFEY: Okay, thanks.
GARY PEACOCK: Jenny, if there are no other questions in the queue we will
adjourn.
OPERATOR: There are no further questions, sir.
GARY PEACOCK: All right, well thank you for joining us. We are adjourned.
OPERATOR: Ladies and gentlemen, that does conclude our conference for
today. You may all disconnect and thank you for participating.
END