SunTrust emerges unbowed after loss

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By ROBERT TRIGAUX

© St. Petersburg Times,
published August 17, 2001

Now that SunTrust Banks has conceded defeat to First Union in a great contest of capitalism to buy Wachovia Corp., SunTrust executives are fanning out across the Southeast and Florida with a pick-me-up message to 27,000 employees and numerous customers.

Sure, we wanted Wachovia. But we don't need the North Carolina banking company.

We are well positioned in top U.S. growth markets to continue SunTrust's conservative, moneymaking ways.

No, the loss of Wachovia to a bigger rival does not make us a takeover target. And being jilted will not force us into a hasty acquisition "on the rebound."

That was SunTrust's pitch, at least, when I sat down this week in Tampa with SunTrust vice chairman Jim Wells, SunTrust's Florida chief executive George Koehn and the bank's Tampa Bay CEO, Dan Mahurin.

Here's what was left unsaid.

First Union and Wachovia -- the two had announced a friendly stock merger before SunTrust made its unsolicited bid this spring -- are two good ol' North Carolina companies that pulled some nasty tricks to trump Atlanta-based SunTrust. Like pushing the North Carolina legislature to start rigging state laws against SunTrust.

And what about Wachovia's purchase of $550-million in First Union stock during its merger fight with SunTrust? As stock prices changed during the three-month battle, SunTrust's hostile bid fell in value from about 17 percent higher than First Union's to only about 5 percent higher by the time Wachovia shareholders voted this month to accept First Union's offer.

Point taken. But who said billion-dollar deals follow Marquess of Queensbury rules? There's a good reason the book detailing the bitter 1980s takeover battle for RJR/Nabisco -- a company, like Wachovia, based in Winston-Salem -- was called Barbarians at the Gate.

Now this rare and hostile banking battle deserves its own book. Maybe one titled First Union's Last Union.

At SunTrust's offices in Tampa, Koehn offers up some figures that show SunTrust, the 12th-largest U.S. bank, operates in growth markets that promise to expand on average by an impressive 8 percent. Larger Bank of America and First Union trail.

All three SunTrust bankers licked their lips in anticipation of spoils resulting from the First Union-Wachovia merger. Combined, the new bank will have some $329-billion in assets, 19-million customers on the East Coast and 90,000 employees. But the merging banks also expect to cut 7,000 jobs and close about 325 branches.

That turmoil will help SunTrust (and other banks) take new business away from the merging institutions.

Yet the biggest opportunity comes when First Union, the buyer, forfeits its sullied name and adopts that of the seller: Wachovia.

Wells thinks consumers will be confused and assume (logically) that Wachovia bought First Union.

The name change, still a few years off, is especially meaningful in Florida and the Tampa Bay area where the Wachovia name remains largely unknown.

In Florida, the three banks with the largest market share are No. 1 Bank of America, No. 2 First Union and No. 3 SunTrust.

That pecking order will not change during the merger or in the scavenger aftermath -- even if SunTrust decides to buy the entire banking franchise in central Florida now up for sale by the departing Huntington Bank of Ohio.

Trying to buy Wachovia under hostile terms cost SunTrust $30-million before taxes. But the money's not all wasted. SunTrust would have taken heat for "giving" Wachovia to First Union had the Georgia bank not made a counteroffer. Besides, SunTrust thinks the takeover fight has energized its employees.

Then again, winning the Wachovia deal would not have hurt SunTrust spirits, either.

There are lessons in all this. SunTrust chose a perilous journey in pursuing a hostile takeover attempt in an industry that scorns public conflict. A less-than-cooperative Wachovia would have made a troubling purchase.

Concludes SunTrust's Wells: "Banks are sold, not bought."

Short takes

IN MEANTIME, HOLD YOUR BREATH: Last Sunday, I wrote that the Environmental Protection Agency was about to backtrack on a multiyear crackdown against those electric utilities with the nation's worst coal-polluting power plants. The EPA had until today to reconsider its tough anti-pollution stance, as ordered by President Bush. But this week, the EPA decided to postpone its reassessment until September. That's when the Bush administration plans to propose a strategy that would set tighter limits of national emissions but allow utilities to trade pollution credits among themselves . . .

BURGER, FRIES AND . . . DASANI? Move over, soda. Bottled water is gaining ground at fast-food chains. Last month, Wendy's started testing the Coke-owned Dasani brand of water in Tampa and Providence, R.I. No word yet on how it's going. But Chick-fil-A already began offering bottled water this year. McDonald's has offered water since 1998 . . .

WOES FOR WENDY'S FOUNDER: As if fast-food icon and Fort Lauderdale resident Dave Thomas did not have enough on his plate. Thomas, 69, reportedly requires dialysis three days a week, and had gall-bladder surgery in mid-July. Now a court brief in Miami says Thomas extended more than $109-million in loans to former Kentucky Gov. Wallace Wilkinson. Wilkinson has since filed for personal bankruptcy protection.

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

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