Wachovia cliffhanger promises more twists, turns

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By ROBERT TRIGAUX

© St. Petersburg Times, published May 25, 2001

Dare we update As The Egos Turn, our banking soap opera? Wachovia chief Bud Baker still spurns the higher-priced but vindictive takeover attempt by SunTrust Banks CEO Phil Humann in favor of the lower-priced but friendly offer by First Union top exec Ken Thompson.

Can all the finger-pointing and accusations in this hostile spat be boiled down to a familiar skit? Let's try.

Wachovia's Baker (blushing): I can't pay the rent.

SunTrust's Humann (pushy): You must pay the rent.

Wachovia's Baker (crying): But I can't pay the rent.

SunTrust's Humann (filing lawsuit): But you must pay the rent.

Wachovia's Baker (countersuing): But I can't pay the rent.

First Union's Thompson (smirking): I'll pay a (cheaper) rent.

Wachovia's Baker (relieved): My hero!

SunTrust's Humann (frustrated): Curses! Foiled again!

Is this really how one of banking's rare hostile takeover fights will end -- with Wachovia snuggled in First Union's arms and SunTrust licking its wounds? All three banks already are heading to the courts, so we'll have plenty of time to handicap this battle.

Wachovia's Baker and his malleable board stubbornly embrace First Union's friendly offer -- even if the price still shortchanges Wachovia shareholders. Suddenly, argues Wachovia (against its own waning corporate culture), being absorbed by a really big bank with lots of problems of its own makes great strategic sense.

First Union's Thompson is so busy pooh-poohing SunTrust's stuffy style and lack of merger experience that so far he's managed to distract many from the fact that First Union's own track record on recent mergers is poor and its financial performance dismal.

SunTrust's Humann is quickly losing the public relations war, outclassed perhaps by the combined one-two PR punches of Wachovia and First Union.

SunTrust has one Wachovia board member on its side: Morris Offit cast the dissenting vote in the board's 14-to-1 verdict to reject the SunTrust offer.

But SunTrust's biggest hurdle? Convincing Wachovia shareholders that a better-managed SunTrust can buy Wachovia under hostile conditions and still make the resulting bank work well. That won't be easy.

Last spring, Tampa Electric cut a deal with federal regulators to pay a $3.5-million fine on top of spending $1-billion to fix its coal-burning power plants and make up for past environmental damage.

The deal was the nation's first settlement between the Environmental Protection Agency and one of the seven major utilities that the EPA and the Justice Department earlier sued for repeated violations of the Clean Air Act.

But with President Clinton gone and President Bush pushing for friendlier energy policies, the federal crackdown on emissions by other power plants may be running out of gas.

So it comes as some surprise that Florida Power, in a May 15 filing with regulators, says the EPA wants information about the utility's coal-fired plants as part of a Clean Air Act initiative. Florida Power's Crystal River plant, fueled by both coal and nuclear energy, ranks high nationally as a pollution source, the EPA says.

Florida Power spokesman Mac Harris says the company provided the EPA with maintenance information about its coal-fired plants but has not heard back from the federal agency. One issue the EPA may be examining: Could major maintenance at Florida Power's older power plants be enough to require the plants to adhere to more modern and tougher pollution standards?

This week in Crystal River, at least, that question seems irrelevant. The area was covered in smoke and ash -- not from the power plant but from nearby wildfires.

Short takes

DANKA SCHOEN: Danka Business Systems chief executive Larry Switzer left the troubled St. Petersburg copier distributor last fall. Then, in a contract dispute, he demanded more than his seven-digit severance package. Details were lacking then, but a new SEC filing explains what Switzer covets: four annual payments of approximately $900,000 each for split-dollar life insurance premiums and a $1.6-million bonus payment. It's now all in the hands of manylawyers. . . .

LEVERAGING BAY NEWS 9: Time Warner Cable apparently likes Bay News 9, its 24-hour local news network covering Tampa Bay. The company already operates such versions as NY1 in New York City, as well as stations in Orlando; Austin, Texas; and Rochester, N.Y. Four other communities are scheduled for their own news channel, and Time Warner this week announced a $15-million plan to convert a vacant bowling alley into the headquarters of a new channel covering the Albany, N.Y., area. . . .

IS ECKERD FOR SALE? Analysts wonder if retailer J.C. Penney Co. may be planning to sell or spin off its Largo-based Eckerd drugstore chain in another year or two. Struggling Eckerd needs to complete a turnaround. And Penney needs to revive its retail empire. Could Eckerd go it alone or become takeover fodder for No. 1 drugstore chain Walgreen Co. or No. 2 CVS Corp.?

-- Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

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