SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/X/ Soliciting Material Pursuant to Section 14a-11(c)
or Rule 14a-12
FIRST INTERSTATE BANCORP
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(Name of Registrant as Specified In Its Charter)
NOT APPLICABLE
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or
14a-6(j)(2) or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was determined):
- ------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------------
(5) Total fee paid:
- ------------------------------------------------------------------------
/x/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of
its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
- ------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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FIRST INTERSTATE BOARD REJECTS WELLS FARGO'S
REVISED TAKEOVER PROPOSAL
-- SAYS FIRST BANK MERGER OFFERS BEST ALTERNATIVE
FOR CREATING NEAR- AND LONG-TERM SHAREHOLDER VALUE --
LOS ANGELES, NOVEMBER 20, 1995 -- First Interstate Bancorp (NYSE:I)
said today its Board of Directors, by unanimous vote, rejected Wells Fargo &
Company's revised acquisition proposal as not in the best interests of First
Interstate and its shareholders and recommended that shareholders reject the
Wells offer and not tender their shares of First Interstate Common Stock
pursuant to the Wells offer. The Board also reaffirmed its determination that
the terms of its announced merger with First Bank System (FBS) are fair to,
and in the best interests of, First Interstate and its shareholders.
The Board's consideration of Wells Fargo's revised proposal and the
FBS merger follows an extensive process of evaluating the company's strategic
alternatives for enhancing shareholder value. After Wells made its initial
takeover proposal public on October 18, First Interstate chairman and CEO,
William E. B. Siart, engaged in extensive discussions with Wells Fargo, as
well as with other potential merger candidates. A full account of that process
is contained in the Schedule 14D-9 filed today by First Interstate with the
Securities and Exchange Commission.
Mr. Siart said: "First Interstate believes that the strategic
combination of First Interstate and FBS will create a dynamic, lower risk,
multi-state banking alliance that will provide substantial near-term and
long-range value.
"We are convinced that this merger is a winning combination for the
long-term benefit of our shareholders and the communities we serve. We believe
it is unfortunate that a respected institution like Wells Fargo would
jeopardize its reputation by ignoring our Board of Directors' carefully
considered decision and choosing instead to recklessly pursue its hostile
takeover proposal. We will not be deterred or distracted from completing our
pending merger with First Bank on your behalf," concluded Mr. Siart.
The First Interstate Banks in 13 western states provide financial
products and services to customers through 1,148 offices. These banks serve
individuals, small businesses, middle market companies and selected large
corporations and financial institutions primarily in the West. Working
together with Standard Chartered Bank of London, First Interstate provides a
variety of international banking services and extends its reach to companies
around the world. First Interstate provides quality financial products and
services marketed at the local level to nearly five million households in over
500 western communities.
# # #
(The full text of a letter to First Interstate shareholders from William
E. B. Siart, on behalf of the Board of Directors, is attached.)
<PAGE>
Dear First Interstate Shareholder:
On November 6, 1995, First Interstate announced that it had entered
into a merger agreement with First Bank System, Inc. ("FBS") pursuant to which
First Interstate would merger with a subsidiary of FBS and each of your shares
of First Interstate common stock would be converted into 2.6 shares of FBS
common stock.
On November 13, 1995, Wells Fargo & Company announced that it intended
to commence an unsolicited exchange offer in which holders of First Interstate
common stock would have the right to exchange each of their shares for
two-thirds of a share of Wells common stock. (The Wells exchange offer has not
yet commenced and it may be several weeks or longer before you receive any
materials with respect to it.) This announcement followed the First Interstate
Board's rejection of Wells' earlier unsolicited proposal to merge with First
Interstate in a transaction in which First Interstate's shareholders would
receive .625 (or possibly .65) shares of Wells common stock for each First
Interstate share.
Your Board of Directors believes that the merger with FBS is in the
best interests of First Interstate and its shareholders. ACCORDINGLY, THE
BOARD RECOMMENDS THAT YOU REJECT THE WELLS FARGO & COMPANY EXCHANGE OFFER AND,
WHEN AND IF SUCH OFFER IS COMMENCED, NOT TENDER ANY OF YOUR SHARES TO WELLS
FARGO.
Your Board's consideration of Wells Fargo's revised proposal and the
FBS merger follows an extensive process of evaluating the company's strategic
alternatives for enhancing shareholder value. This process began several
months prior to Wells' initial unsolicited bid and included discussions and
evaluations of several potential merger possibilities, including one with
Wells Fargo. The record is clear. After Wells made its initial takeover
proposal public on October 18, on behalf of your Board I engaged in extensive
discussions with Wells Fargo, as well as with other potential merger
candidates. A full account of that process is contained in the Schedule 14D-9
filed today by First Interstate with the Securities and Exchange Commission
and enclosed with this letter.
The First Interstate Board believes that the strategic combination of
First Interstate and FBS creates a dynamic, lower risk, multi-state banking
alliance that will provide substantial near-term and long-range value to you.
Your Board and management believe that this combination offers better value to
First Interstate's shareholders than the Wells offer.
In reaching its determination to reaffirm the FBS merger and recommend
rejection of the Wells offer, the First Interstate Board relied upon a number
of factors, including:
o the greater earnings per share and cash flow per share of an FBS
combination compared to a Wells Fargo combination;
o the higher dividends per share to be received by First Interstate
shareholders as a result of the FBS merger than with a Wells Fargo
combination;
o the reduced credit risk resulting from operations in 21 states under the
FBS merger as contrasted with the substantially greater exposure to the
California market that would result from a merger with Wells;
o the superior market position created by an FBS merger -- a top three
ranking, in terms of deposit market share, in ten states -- as opposed to
increasing First Interstate's top three ranking in only one state in a
Wells merger;
<PAGE>
o the substantial loss of revenue, as compared to Wells' public statements,
that would result from Wells' proposed branch closings, other cost saving
measures and antitrust divestitures (revenue losses not present in the
FBS merger);
o the dependence of the value of the Wells offer on Wells' sustaining its
high price-to- earnings ratio relative to other high quality bank stocks,
including FBS;
o Wells' use of purchase accounting for the transaction, which creates
additional goodwill in excess of $7 billion, which would substantially
reduce future earnings and returns on equity; and
o the opinions of First Interstate's independent financial advisors,
Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, that the
exchange ratio of the FBS Merger is fair to First Interstate
shareholders.
We understand very well why our highly successful multi-state
franchise, with its operating scope and strengths, is attractive to Wells
Fargo. Our concern is not with Wells' interests, but the strategic alternative
that is best for you.
We expect the First Interstate/FBS combined company to achieve 1997
EPS accretion of 23% and a return on equity of 27.5%, with virtually no
tangible book value dilution. Because cost reductions would be achieved
through back office and staff cuts and systems integration, they can be
accomplished quickly and with minimal impact to our customers and revenue.
Under pooling accounting, the combined company will avoid the creation of
goodwill and still be able to continue returning excess capital to
shareholders through share repurchases. The company will have a reduced risk
profile and an expanded foundation for future business growth across our
21-state service territory. It will have an exceptional, low-cost deposit base
and be a leader in pioneering alternative delivery systems. And the combined
company will be the number one ranked bank in the country in corporate cards,
purchasing cards, corporate trust and ATM/POS, in addition to being among the
top five banks in merchant card processing and asset management.
Your Board and management are convinced that the FBS merger is a
winning combination for the long-term benefit of our shareholders. It is
unfortunate that a respected institution like Wells Fargo would jeopardize its
reputation by ignoring your Board of Directors' carefully considered decision
and choosing instead to recklessly pursue its hostile takeover proposal. We
will not be deterred or distracted from completing our pending merger with
First Bank on your behalf.
A more detailed description of the factors considered by your Board of
Directors is contained in the Schedule 14D-9. We urge you to read it carefully
and in its entirety so that you will be fully informed as to the Board's
recommendation.
The date of the special meeting of First Interstate's shareholders
which will be called to consider the proposed merger with FBS has not yet been
set. First Interstate is not soliciting proxies from shareholders with respect
to the FBS merger at this time. A joint Proxy Statement/Prospectus of First
Interstate and FBS will be mailed to the Company's
2
<PAGE>
shareholders in connection with the special meeting of each company's
shareholders which will be called to vote upon the merger.
On behalf of the Board of Directors,
William E. B. Siart
Chairman and Chief Executive Officer
3
The participants in this solicitation include First Interstate Bancorp
("First Interstate"), the following directors: John E. Bryson, Edward M.
Carson, Dr. Jewel Plummer Cobb, Ralph P. Davidson, Myron Du Bain, Don C.
Frisbee, George M. Keller, Thomas L. Lee, Harold M. Messmer, Jr., Dr. William
F. Miller, William S. Randall, Dr. Steven B. Sample, Forrest N. Shumway,
William E. B. Siart, Richard J. Stegemeier, Daniel M. Tellep, and Bruce G.
Willison. Employee participants include William J. Bogaard, Executive Vice
President and General Counsel; Theodore F. Craver, Jr., Executive Vice
President and Treasurer; Daniel R. Eitingon, Executive Vice President,
Technology Banking; Gary S. Gertz, Executive Vice President and General
Auditor; Lillian R. Gorman, Executive Vice President, Human Resources; Robert
E. Greene, Executive Vice President and Chief Credit Officer; Steven L. Scheid,
Executive Vice President, Financial Planning and Analysis; Richard W. Tappey,
Executive Vice President, Administration; David K. Wilson, Executive Vice
President and Senior Credit Review Manager; James J. Curran, Chief Executive
Officer, Northwest Region; Linnet F. Deily, Chief Executive Officer, Texas
Region; John S. Lewis, Chief Executive Officer, Southwest Region; Shirley
Hosoi, Senior Vice President, Corporate Communications; Christine McCarthy,
Executive Vice President, Investor Relations; Mariann Ohanesian, Vice
President; Kenneth W. Preston, Vice President, External Communications; and
Shiromi D. Velhamani, Assistant Vice President, Investor Relations. All such
persons and those listed below are deemed to own beneficially less than 2%, and
no participant individually owns more than 1%, of the outstanding shares of
First Interstate's common stock in the aggregate. First Bank System, Inc.
("FBS"), Eleven Acquisition Corp., a wholly owned subsidiary of FBS ("FBS
Sub"), and First Interstate have entered into an Agreement and Plan of Merger,
pursuant to which FBS Sub will merge with and into First Interstate with First
Interstate being the surviving corporation (the "Merger"). At the effective
time ("Effective Time") of the Merger, pursuant to the Merger Agreement, FBS
will change its name to First Interstate Bancorp ("New First Interstate") and
Mr. Siart will become President and Chief Operating Officer of New First
Interstate. In addition, although not specifically required by the Merger
Agreement, it is anticipated that at New First Interstate, Mr. Willison will
serve as Vice Chairman, Corporate Banking and Linnet F. Deily will serve as
Vice Chairman, Retail Banking. Under certain benefit plans, severance
arrangements and other employment agreements maintained, or entered into, by
First Interstate, certain benefits may become vested or accelerated in
connection with the Merger with respect to Mr. Siart, Mr. Willison, other
directors of First Interstate, Ms. Deily, and the other participants. During
the period commencing on the Effective Time and continuing for not less than
six years thereafter, New First Interstate will, to the fullest extent
permitted under applicable law, have certain indemnification obligations to the
participants with respect to matters arising at or prior to the Effective Time
in connection with the Merger. First Interstate has absolute and sole
discretion in designating 10 of the 20 directors of New First Interstate. First
Interstate has not yet determined which other individuals it will designate to
serve as directors of First New Interstate. For further description of the
foregoing interests, see the Schedule 14D-9, dated and filed with the
Securities and Exchange Commission on November 20, 1995, including the exhibits
thereto.
<PAGE>
November 20, 1995
To All Employees:
We announced today that the Board of Directors rejected the Wells Fargo revised
acquisition proposal and reaffirmed its decision to merge with First Bank
System.
The Board's conclusion, after a thoughtful and comprehensive review, was that
the First Bank System merger offered significant near- and long-term benefits
for First Interstate shareholders based on greater opportunities for business
expansion, revenue growth, a lower risk profile and a highly complementary
operational and strategic fit.
We firmly believe that this decision is not only in the best interests of our
shareholders, but also presented the best alternative for you, our customers,
and our communities. Having said that, I will quickly add that this decision
will not be without hardship. The First Bank System business case is based on
cost cuts of $500 million and an elimination of approximately 6,000 FTE across
the new 21-state territory. While it is too early to identify more
specifically the jobs that will be affected, it is anticipated that these cuts
will come from both organizations and is intended to avoid being unduly harsh
to any one community.
Human Resources is currently working on the severance program, and details will
be forthcoming shortly. I commit to you that we will strive to be as fair and
generous as possible and to provide as much transition assistance as we can to
those of you who will be impacted.
At this time, it is our belief that the deal will close within six months, once
we have received regulatory approval from the Federal Reserve and shareholder
approval.
Adding an element of complication, however, is the fact that Wells Fargo has
stated its intentions to try to derail this process in an attempt to win the
battle to acquire us. While the technicalities are complex, the bottom line is
that Wells will be trying to get our shareholders to support its deal through a
proxy fight and they may try to unseat our board through a consent
solicitation. In addition, Wells has filed a lawsuit attempting to invalidate
certain elements of our First Bank merger agreement and to require us to
eliminate the shareholders rights plan or poison pill, which is a common
takeover defense mechanism.
No doubt, Wells' on-going actions will be distracting for us and for our
customers. They are intended to be just that--a distraction. I would hope,
however, that we will not be diverted, and that we will remain focused, as
always, on our customers and on our day-to-day tasks.
As things unfold over the course of the next several months, I will communicate
with you as fully, frequently and quickly as I possibly can. I recognize that
in times of uncertainty your "need to know" is heightened, and I want you to
hear the "news" first from me. That may not always be possible, but that is
what I will strive for.
This is a team that have always responded with an A+ effort. I am sincerely
grateful to all of you for everything that you have done and are doing for this
company. Thank you.
/s/ Bill Siart
------------------------------------------
William E. B. Siart
<PAGE>
The participants in this solicitation include First Interstate Bancorp
("First Interstate"), the following directors: John E. Bryson, Edward M.
Carson, Dr. Jewel Plummer Cobb, Ralph P. Davidson, Myron Du Bain, Don
C.Frisbee, George M. Keller, Thomas L. Lee, Harold M. Messmer, Jr., Dr. William
F. Miller, William S. Randall, Dr. Steven B. Sample, Forrest N. Shumway,
William E. B. Siart, Richard J. Stegemeier, Daniel M. Tellep, and Bruce G.
Willison. Employee participants include William J. Bogaard, Executive Vice
President and General Counsel; Theodore F. Craver, Jr., Executive Vice
President and Treasurer; Daniel R. Eitingon, Executive Vice President,
Technology Banking; Gary S. Gertz, Executive Vice President and General
Auditor; Lillian R. Gorman, Executive Vice President, Human Resources; Robert
E. Greene, Executive Vice President and Chief Credit Officer; Steven L. Scheid,
Executive Vice President, Financial Planning and Analysis; Richard W. Tappey,
Executive Vice President, Administration; David K. Wilson, Executive Vice
President and Senior Credit Review Manager; James J. Curran, Chief Executive
Officer, Northwest Region; Linnet F. Deily, Chief Executive Officer, Texas
Region; John S. Lewis, Chief Executive Officer, Southwest Region; Shirley
Hosoi, Senior Vice President, Corporate Communications; Christine McCarthy,
Executive Vice President, Investor Relations; Mariann Ohanesian, Vice
President; Kenneth W. Preston, Vice President, External Communications; and
Shiromi D. Velhamani, Assistant Vice President, Investor Relations. All such
persons and those listed below are deemed to own beneficially less than 2%, and
no participant individually owns more than 1%, of the outstanding shares of
First Interstate's common stock in the aggregate. First Bank System, Inc.
("FBS"), Eleven Acquisition Corp., a wholly owned subsidiary of FBS ("FBS
Sub"), and First Interstate have entered into an Agreement and Plan of Merger,
pursuant to which FBS Sub will merge with and into First Interstate with First
Interstate being the surviving corporation (the "Merger"). At the effective
time ("Effective Time") of the Merger, pursuant to the Merger Agreement, FBS
will change its name to First Interstate Bancorp ("New First Interstate") and
Mr. Siart will become President and Chief Operating Officer of New First
Interstate. In addition, although not specifically required by the Merger
Agreement, it is anticipated that at New First Interstate, Mr. Willison will
serve as Vice Chairman, Corporate Banking and Linnet F. Deily will serve as
Vice Chairman, Retail Banking. Under certain benefit plans, severance
arrangements and other employment agreements maintained, or entered into, by
First Interstate, certain benefits may become vested or accelerated in
connection with the Merger with respect to Mr. Siart, Mr. Willison, other
directors of First Interstate, Ms. Deily, and the other participants. During
the period commencing on the Effective Time and continuing for not less than
six years thereafter, New First Interstate will, to the fullest extent
permitted under applicable law, have certain indemnification obligations to the
participants with respect to matters arising at or prior to the Effective Time
in connection with the Merger. First Interstate has absolute and sole
discretion in designating 10 of the 20 directors of New First Interstate. First
Interstate has not yet determined which other individuals it will designate to
serve as directors of First New Interstate. For further description of the
foregoing interests, see the Schedule 14D-9, dated and filed with the
Securities and Exchange Commission on November 20, 1995, including the exhibits
thereto.
<PAGE>
[LOGO] FIRST BANK SYSTEM, INC. [LOGO]
MERGER WITH
FIRST INTERSTATE BANCORP
NOVEMBER 17, 1995
<PAGE>
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The following material has been prepared by or on behalf of First Bank
System, Inc. ("FBS"). FBS and First Interstate Bancorp ("First Interstate")
have entered into an Agreement and Plan of Merger, dated as of November 5,
1995 (the "Merger Agreement"), pursuant to which First Interstate will be
merged with a wholly owned subsidiary of FBS. FBS is the holder of an
option to purchase 19.9% of the outstanding shares of First Interstate
common stock, which option is exercisable under certain circumstances. In
addition, FBS holds certain shares of First Interstate common stock in a
fiduciary capacity.
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<PAGE>
STRATEGIC RATIONALE
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<TABLE>
<CAPTION>
FIRST BANK SYSTEM WELLS FARGO
<S> <C>
BUILDING A FIRST-RATE FRANCHISE NO GROWTH, FINANCIAL ENGINEERING STRATEGY
- Expanding business lines: - Cutting Costs
- Corporate Card Rank 1st
- Purchasing Card Rank 1st - Buying back shares
- Merchant Processing Rank 5th
- ATM/POS Rank 1st - ..."much of the improvement from 1993
- Corporate Trust Rank 1st resulted from a lower loan loss provision
- Asset Management Rank 4th and the effect of share repurchases, not
from growth in our underlying operations."
- Employing technology to reduce expenses
and improve efficiency Wells Fargo & Company
1994 Annual Report, page 2
- Creating a highly efficient delivery structure:
- Product/Distribution Paradigm
- Telephone banking
- ATMs
- Supermarkets
</TABLE>
3
<PAGE>
FBS VS. WFC MERGER EVALUATION
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- FBS offers superior value to FI shareholders
- WFC has overestimated cost takeout and underestimated revenue
losses. WFC California advantage is less than $100 million
- FBS has not included significant potential for additional revenue
growth
4
<PAGE>
FBS PROVIDES SUPERIOR EPS TO FI SHAREHOLDERS
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Base FI EPS $10.99 $12.53 $14.31
FI EPS - WFC/FI Combination $9.77 $12.18 $14.72
Accretion vs. Base (11)% (3)% 3%
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FI EPS - FBS/FI Combination $11.92 $15.61 $17.74
Accretion vs. Base 8% 24% 24%
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</TABLE>
- ---------------------------------------
- Based on "Street" estimates with normalized loss loss provision:
50 bp for First Interstate, 80 bp for Wells Fargo
- $85 million net cost takeout benefit for WFC
- Assumes acquisition date 1/1/96
5
<PAGE>
FBS PROVIDES SUPERIOR CASH EPS TO FI SHAREHOLDERS
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Base FI Cash EPS $11.81 $13.40 $15.23
FI Cash EPS - WFC/FI Combination $12.35 $14.92 $17.65
Accretion vs. Base 5% 11% 16%
- -------------------------------------------------------------------------------
FI Cash EPS - FBS/FI Combination $13.05 $16.81 $19.02
Accretion vs. Base 10% 25% 25%
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</TABLE>
- ---------------------------------------------------
- Based on "Street" estimates, adjusted for amortization of goodwill and
intangibles, with normalized loss loss provision: 50 bp for First
Interstate, 80 bp for Wells Fargo
- $85 million net cost takeout benefit for WFC
- Assumes acquisition date 1/1/96
6
<PAGE>
EXCHANGE COMPARISON
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
FBS 1996 Cash EPS $5.20 WFC 1996 Cash EPS $17.05
FI 1996 Cash EPS $11.81 FI 1996 Cash EPS $11.81
Breakeven Exchange 2.27 Breakeven Exchange 0.69
Actual Exchange 2.60 Actual Exchange 0.67
Premium/(Discount) 14.48% Premium/(Discount) (3.75)%
FI Ownership Percentage 58% FI Ownership Percentage 52%
- -------------------------------------------------------------------------------
----------------------------------------------------------------------------
FI Cash EPS - 1998 $19.02 --> Required WFC Exchange 0.76
----------------------------------------------------------------------------
</TABLE>
7
<PAGE>
VALUE PER FI SHARE
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<TABLE>
<CAPTION>
BASED ON BASED ON
BASED ON CONVERGENT CONVERGENT
TODAY'S CASH P/E REPORTED
PRICE MULTIPLE (a) P/E MULTIPLE (b)
<S> <C> <C> <C>
FBS/FI $135.85 $151 $156
WFC/FI $139.58 $134 $121
</TABLE>
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(a) - 1997 FBS Cash EPS estimate is $5.75, implying a current price
multiple of 9.1x based on a price of $52.25 at close of business
11/16/5
- 1997 WFC Cash EPS estimate is $19.46 implying a current price
multiple of 10.8x based on a price of $209.375 at close of
business 11/6/95
- Over time these multiples are expected to converge - breakeven
P/E for FBS would need to be 9.6x to match value with Wells P/E
of 10.8x
- A convergent multiple of 9x Cash EPS was used for this
computation
(b) - 1997 FBS reported EPS estimate is $5.15, implying a current price
multiple of 10.2x based on a price of $52.25
- 1997 WFC reported EPS estimate is $18.72, implying a current
price multiple of 11.2x based on a price of $209.375
- A convergent multiple of 10x on 1997 reported earnings was used
for this computation
8
<PAGE>
FBS HAS OUTPERFORMED WFC ON A TOTAL RETURN BASIS
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- -------------------------------------------------------------------------------
This graph presents certain information regarding stock prices and CAGR for
FBS and WFC. It shows a six year low for FBS stock $10.63 on November 2, 1990,
and a six year low for WFC stock of $45.75 on September 28, 1990. It shows
a November 10, 1995 stock price of $53.13 for FBS and $215.38 for WFC. It shows
a five year total market return(1) as a percentage as CAGR of 42.9% for FBS and
39.7% for WFC.
1 Based on calculating total return for both companies from respective 6
year lows.
9
<PAGE>
FBS DELIVERS SUPERIOR KEY PERFORMANCE RATIOS
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- -------------------------------------------------------------------------------
Percent
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
FI FBS WFC
BASE @2.60 @.667
<S> <C> <C> <C>
Return on Assets (a) 1.56 2.02 1.61
Return on Equity (a) 23.2 27.0 12.4
1995 - 1996 EPS Growth (b) 13.1 22.6 0.4
-----------------------------------------------------------------------
</TABLE>
- ---------------------------------------------------------------
(a) For the quarter ended September 30, 1995
Assumes normalized loan loss provision and full phase-in
of cost takeouts
(b) Assumes acquisition date 1/1/96
10
<PAGE>
WILL INVESTORS IGNORE REPORTED ROE?
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- -------------------------------------------------------------------------------
3Q95 Book ROE ------------------------------------------------
Percent 1. Wells Fargo 30.4
------------------------------------------------
FIRST BANK SYSTEM - PRO FORMA 27.0
------------------------------------------------
2. First Interstate 25.8
3. CoreStates 23.4
4. Norwest 21.5
------------------------------------------------
5. First Bank System 21.4
------------------------------------------------
6. Fifth Third 18.5
7. NationsBank 18.4
8. Northern Trust 18.3
9. KeyCorp 18.2
10. Fleet Financial 18.1
11. First Union 17.9
12. U.S. Bancorp 17.8
13. National City 17.7
14. Wachovia 17.5
15. Bank of Boston 17.3
16. Mellon 17.2
17. Banc One 17.2
18. Comerica 16.8
19. Barnett Banks 16.5
20. NBD 15.9
21. First Security 15.6
22. Shawmut 15.3
23. BankAmerica 15.2
24. SunTrust 14.1
25. PNC 13.5
26. Bancorp Hawaii 12.7
------------------------------------------------
WELLS FARGO - PRO FORMA 12.4
------------------------------------------------
Source: Montgomery Securities
FBS & WFC pro forma alternatives are third quarter annualized earnings
adjusted for normalized provision, full cost takeouts and acquisition entries
11
<PAGE>
WILL INVESTORS IGNORE EPS GROWTH?
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1995 - 1996 EPS Growth
Percent
1. PNC 18.3
2. First Union 16.6
3. CoreStates 15.6
4. Mellon 13.5
5. Norwest 13.5
-------------------------------------------------
6. FIRST BANK SYSTEM - PRO FORMA & ACT. 13.2
-------------------------------------------------
7. Fifth Third 13.0
8. NBD 12.6
9. Northern Trust 12.5
10. Banc One 11.9
11. Shawmut 11.8
12. BankAmerica 11.4
13. NationsBank 11.3
-------------------------------------------------
14. WELLS FARGO 10.4
-------------------------------------------------
15. Fleet Financial 10.2
16. Barnett 10.2
17. SunTrust 10.2
18. First Security 9.5
19. KeyCorp 9.3
20. Wachovia 9.3
21. Bank of Boston 8.8
22. Comerica 8.8
23. Bancorp Hawaii 8.0
24. U.S. Bancorp 6.8
25. National City 6.4
26. First Interstate 2.3
--------------------------------------------------
WELLS FARGO - PRO FORMA (0.1)
--------------------------------------------------
Source: First Call 1995 and 1996 EPS estimates
FBS and WFC pro forma alternatives are 1996
estimates adjusted for normalized provision
and partial cost takeouts
Assuming acquisition date 1/1/96
12
<PAGE>
EXPENSE SAVINGS COMPARISON
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIRST BANK SYSTEM WELLS FARGO
<S> <C>
- - Cost reductions from FBS transaction - Major takeouts in occupancy and retail
are revenue neutral and can be are inconsistent with revenue loss
obtained quickly assumptions. Takeouts in Commercial
and Trust relationship businesses are
not credible
- - Back office, systems, and staff cuts - Branch consolidations cause revenue
have minimal revenue impact loss. Cost reductions from branch
consolidations are slower to realize
- - Common FBS/FI Hogan deposit system - Home-grown software impedes timely
accelerates takeouts technology conversion
- - Multi-state bank experience - Single-state, single-bank experience
- - Proven record of extracting costs from - No significant bank acquisition since
acquisition integration (22 in 4 years) Crocker (1986)
</TABLE>
13
<PAGE>
EXPENSE TAKEOUT COMPARISON
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
$ Millions FI FBS WFC
------------ ------------------------------------- ---------------------------------
WFC vs. FBS
1996 BASE TAKEOUT TAKEOUT INCREMENTAL TAKEOUT TAKEOUT INCREMENTAL INCREMENTAL
EXPENSE DOLLARS PERCENT EXPENSE DOLLARS PERCENT EXPENSE DIFFERENCE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Staff/Executive $ 172 $ 114 66% $ 58 $159 92% $ 13 (45)
Data Processing 214 83 39 131 110 51 104 (27)
Operations 439 110 25 329 123 28 316 (13)
Occupancy/F&E 394 39 10 355 170 43 224 (131)
Business Lines:
Retail 682 100 15 582 288 42 394 (188)
Payment Systems 55 27 50 28 29 53 26 (2)
Commercial 168 18 10 150 92 55 76 (74)
Trust 79 9 10 70 29 37 50 (20)
------ ---- --- --- ---- -----
Total Business Lines 984 154 16 830 438 44 546 (284)
Goodwill 60 0 0 60 0 0 60 0
------ ---- --- --- ---- -----
Total Expense $2,263 $500 22% $1,763 $1,000 44% $1,263 (500)
------ ---- ------ ----- ----- -----
------ ---- ------ ----- ----- -----
Marginal Efficiency Ratio 45% 35%
</TABLE>
14
<PAGE>
FTE TAKEOUT COMPARISON
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
------------------------------------------------------------
HOW CAN WFC RUN FI WITH JUST OVER HALF OF FI'S HEADCOUNT
WHEN WFC HAS NO PRESENCE OUTSIDE CALIFORNIA?
------------------------------------------------------------
<TABLE>
<CAPTION>
FI FBS WFC*
--------- ---------------------------- --------------------------
1986 FTE PERCENT FTE PERCENT
BASE REDUCTION TAKEOUT REDUCTION TAKEOUT
<S> <C> <C> <C> <C> <C>
Staff/Executive 1,244 850 68 % 1,186 95 %
Data Processing 896 450 50 596 67
Operations 7,946 2,280 29 2,549 32
Business Lines:
Retail 13,216 1,830 14 2,551 42
Payment Systems 498 250 50 263 53
Commercial 2.900 290 10 1,635 56
Trust 1.300 130 10 459 35
------ ----- ------
Total Business Lines 17,914 2,500 14 7,908 44
------ ----- ------
Total Expense 28,000 6,080 22 % 12,239 44 %
------ ----- ------
------ ----- ------
</TABLE>
- -------------------------------------------------------------------------------
* Estimated by applying FBS' ratio (FTE takeout %/total cost takeout %) to WFC
total cost takeout %
15
<PAGE>
WFC NUMBERS ARE NOT CREDIBLE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$ Millions
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COST TAKEOUT ASSUMPTIONS
WFC $1,000
FBS 500
------
Difference $500
------
------
EXPENSE SAVINGS*
----------------------
TOTAL ASSUMES ASSUMES
EXPENSE ALL BRANCHES 75% BRANCHES
WFC ADVANTAGE VS. FBS: BASE CLOSED CLOSED
CALIFORNIA BUSINESS LINE OVERLAP
Personnel Expense $290 $115 $84
Occupancy/Equipment Expense 130 130 94
Other Expense 75 30 22
------ ------ ------
Total Expense $495 $275 $200
------ ------ ------
------ ------ ------
</TABLE>
- --------------------------------------------------
* 100% savings in occupancy/equipment, 40% in
personnel and other expense in closed branches
16
<PAGE>
FBS VS. WFC - THE REAL GAP
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$ Millions
<TABLE>
<CAPTION>
PRETAX
INCOME
<S> <C> <C>
CALIFORNIA CLOSED/MERGED BRANCHES: (75% OF BRANCH/OFFICES)
Expense Savings 200
Revenue Loss: $2.2 billion, 15% deposit attrition* (110)
------
Net Closed/Merged Branches 90
CALIFORNIA MARKETING/ADVERTISING: (50% OF FI TOTAL) 20
DIVESTED BRANCHES: (15 BRANCHES/$900 MILLION)
Expense Savings 30
Revenue Loss (55)
------
Net Divested Branches (25)
----
Total Gap 85
----
</TABLE>
- ----------------------------------------
* Deposit Attrition Revenue Loss = 3.5% net interest income,
1.0% deposit service charge, 0.5% all other income
17
<PAGE>
WFC ESTIMATE OF REVENUE LOSSES RESULTING FROM THE MERGER IS UNDERSTATED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- Front-office branch closings in order to justify the substantial
cost savings will generate significant fall-off in customer revenues
in those branches
- Other California in-market acquisitions have resulted in 15-40%
deposit attrition (BAC/SecPac, Great Western/Home Fed,
Wells/Crocker)
- Required divestiture of approximately $900 million in deposits is
grossly understated: further review may require $1.6 billion of
divestitures with much more revenue loss
- A hostile transaction is likely to result in some of the depositors
taking sides, which is likely to result in further revenue attrition
18
<PAGE>
RETAIL CROSS-SELL OPPORTUNITY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
FBS Cross-sell Ratio(a) 3.9
FI Cross-sell Ratio 2.6
-----
Cross-sell Ratio Opportunity 1.3 accounts/HH
-----
-----
Number of FI Core Households 2.9 million
Cross-sell Ratio Opportunity x 1.3
-----
New Product Opportunity 3.77 million
Weighted Average Pretax Income
per New Account(b) x $237
-----
Pretax Income Opportunity $893 million
-----
-----
</TABLE>
_________________________
(a) Cross-sell ratio based on products sold to core transaction account
households
(b) Based on FBS' current product profitability data
19
<PAGE>
FUNDING ADVANTAGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$ MILLIONS
<TABLE>
<CAPTION>
REVENUE
IMPACT
<S> <C>
- - Initial replacement of $4 billion of wholesale funding at FBS
with First Interstate core funding (80 basis points) $32
- - Funding of FBS 1996 loan growth of $1.5 billion with
First Interstate core funding instead of wholesale funding
(80 basis points) $12
----
$44
----
----
</TABLE>
20
<PAGE>
REDUCED RISK THROUGH DIVERSIFICATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIRST BANK SYSTEM WELLS FARGO
- - Risk diversified across 21 states - Risk is further concentrated in
versus current 13 states California and territory remains
limited to 13 states
- - Top 3 ranking in 10 states - Top 3 ranking in only 4 states
- - 30% of assets located in California - 70% of total assets and 78% of
real estate loans located in
California
21
<PAGE>
SUMMARY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- FBS offers superior value to FI shareholders
- Higher exchange premium 14.5% vs. (3.8)%
- Higher ownership 58% vs. 52% to FI shareholders
- Higher 1997 EPS accretion 24% vs. (3)% and cash EPS accretion 25%
vs. 11%
- Higher share value
- WFC has overestimated cost takeout and underestimated revenue losses
- WFC California advantage is less than $100 million
- Additional divestitures likely
- FBS has not included significant potential for additional revenue
growth
- Retail cross-sell
- Funding advantages
- FBS/FI is the stronger franchise
- Better geographic diversification
- Growing high value business lines
- Proven multi-state technology
22
<PAGE>
The participants in this solicitation include First Interstate Bancorp
("First Interstate"), the following directors: John E. Bryson, Edward M. Carson,
Dr. Jewel Plummer Cobb, Ralph P. Davidson, Myron Du Bain, Don C. Frisbee, George
M. Keller, Thomas L. Lee, Harold M. Messmer, Jr., Dr. William F. Miller, William
S. Randall, Dr. Steven B. Sample, Forrest N. Shumway, William E. B. Siart,
Richard J. Stegemeier, Daniel M. Tellep, and Bruce G. Willison. Employee
participants include William J. Bogaard, Executive Vice President and General
Counsel; Theodore F. Craver, Jr., Executive Vice President and Treasurer; Daniel
R. Eitingon, Executive Vice President, Technology Banking; Gary S. Gertz,
Executive Vice President and General Auditor; Lillian R. Gorman, Executive Vice
President, Human Resources; Robert E. Greene, Executive Vice President and Chief
Credit Officer; Steven L. Scheid, Executive Vice President, Financial Planning
and Analysis; Richard W. Tappey, Executive Vice President, Administration; David
K. Wilson, Executive Vice President and Senior Credit Review Manager; James J.
Curran, Chief Executive Officer, Northwest Region; Linnet F. Deily, Chief
Executive Officer, Texas Region; John S. Lewis, Chief Executive Officer,
Southwest Region; Shirley Hosoi, Senior Vice President, Corporate
Communications; Christine McCarthy, Executive Vice President, Investor
Relations; Mariann Ohanesian, Vice President; Kenneth W. Preston, Vice
President, External Communications; and Shiromi D. Velhamani, Assistant Vice
President, Investor Relations. All such persons and those listed below are
deemed to own beneficially less than 2%, and no participant individually owns
more than 1%, of the outstanding shares of First Interstate's common stock in
the aggregate. First Bank System, Inc. ("FBS"), Eleven Acquisition Corp., a
wholly owned subsidiary of FBS ("FBS Sub"), and First Interstate have entered
into an Agreement and Plan of Merger, pursuant to which FBS Sub will merge with
and into First Interstate with First Interstate being the surviving corporation
(the "Merger"). At the effective time ("Effective Time") of the Merger, pursuant
to the Merger Agreement, FBS will change its name to First Interstate Bancorp
("New First Interstate") and Mr. Siart will become President and Chief Operating
Officer of New First Interstate. In addition, although not specifically required
by the Merger Agreement, it is anticipated that at New First Interstate, Mr.
Willison will serve as Vice Chairman, Corporate Banking and Linnet F. Deily will
serve as Vice Chairman, Retail Banking. Under certain benefit plans, severance
arrangements and other employment agreements maintained, or entered into, by
First Interstate, certain benefits may become vested or accelerated in
connection with the Merger with respect to Mr. Siart, Mr. Willison, other
directors of First Interstate, Ms. Deily, and the other participants. During the
period commencing on the Effective Time and continuing for not less than six
years thereafter, New First Interstate will, to the fullest extent permitted
under applicable law, have certain indemnification obligations to the
participants with respect to matters arising at or prior to the Effective Time
in connection with the Merger. First Interstate has absolute and sole discretion
in designating 10 of the 20 directors of New First Interstate. First Interstate
has not yet determined which other individuals it will designate to serve as
directors of First New Interstate. For further description of the foregoing
interests, see the Schedule 14D-9, dated and filed with the Securities and
Exchange Commission on November 20, 1995, including the exhibits thereto.
<PAGE>
ENHANCED SHAREHOLDER VALUE
- --------------------------------------------------------------------------------
The First Bank System transaction makes tremendous financial sense for
the First Interstate shareholder
All numbers presented below are from the First Interstate shareholders'
perspective
FBS WFC
--- ---
- -------------------------------------------------------------------------------
EXCHANGE RATIO 2.60 0.67
HIGH EARNINGS ACCRETION
1996 EPS 8% (10%)
1997 EPS 24% 0%
1997 EPS (full cost saves) 24% 9%
1996 Cash EPS 10% 6%
1997 Cash EPS 25% 14%
1997 Cash EPS (full cost saves) 25% 23%
HIGHER DIVIDEND RATE (18% increase) $3.77PS $3.20PS
Notes: Results are based on Wall Street consensus estimates, and normalized for
loan loss provisions (50 bps for FI and 80 bps for WFC)
ANALYSIS OF REVISED WELLS FARGO PROPOSAL
- --------------------------------------------------------------------------------
OPERATING PERFORMANCE TRENDS
1993 1994 9/30/95
- --------------------------------------------------------------------------------
OPERATING EFFICIENCY RATIO:
First Bank System 64% 58% 55%
Wells Fargo 56 57 57
First Interstate 66 61 59
Peer Median 62 62 60
REVENUE GROWTH:
First Bank System 32.1% 5.7% 19.6%
Wells Fargo (0.3) (0.5) (0.4)
First Interstate 3.4 11.7 9.0
Peer Median 9.0 1.8 6.4
NPAS/TOTAL ASSETS:
First Bank System 0.69% 0.51% 0.51%
Wells Fargo 3.01 1.60 1.66
First Interstate 0.57 0.46 0.37
Peer Median 0.90 0.62 0.56
<PAGE>
The participants in this solicitation include First Interstate Bancorp
("First Interstate"), the following directors: John E. Bryson, Edward M. Carson,
Dr. Jewel Plummer Cobb, Ralph P. Davidson, Myron Du Bain, Don C. Frisbee, George
M. Keller, Thomas L. Lee, Harold M. Messmer, Jr., Dr. William F. Miller, William
S. Randall, Dr. Steven B. Sample, Forrest N. Shumway, William E. B. Siart,
Richard J. Stegemeier, Daniel M. Tellep, and Bruce G. Willison. Employee
participants include William J. Bogaard, Executive Vice President and General
Counsel; Theodore F. Craver, Jr., Executive Vice President and Treasurer; Daniel
R. Eitingon, Executive Vice President, Technology Banking; Gary S. Gertz,
Executive Vice President and General Auditor; Lillian R. Gorman, Executive Vice
President, Human Resources; Robert E. Greene, Executive Vice President and Chief
Credit Officer; Steven L. Scheid, Executive Vice President, Financial Planning
and Analysis; Richard W. Tappey, Executive Vice President, Administration; David
K. Wilson, Executive Vice President and Senior Credit Review Manager; James J.
Curran, Chief Executive Officer, Northwest Region; Linnet F. Deily, Chief
Executive Officer, Texas Region; John S. Lewis, Chief Executive Officer,
Southwest Region; Shirley Hosoi, Senior Vice President, Corporate
Communications; Christine McCarthy, Executive Vice President, Investor
Relations; Mariann Ohanesian, Vice President; Kenneth W. Preston, Vice
President, External Communications; and Shiromi D. Velhamani, Assistant Vice
President, Investor Relations. All such persons and those listed below are
deemed to own beneficially less than 2%, and no participant individually owns
more than 1%, of the outstanding shares of First Interstate's common stock in
the aggregate. First Bank System, Inc. ("FBS"), Eleven Acquisition Corp., a
wholly owned subsidiary of FBS ("FBS Sub"), and First Interstate have entered
into an Agreement and Plan of Merger, pursuant to which FBS Sub will merge with
and into First Interstate with First Interstate being the surviving corporation
(the "Merger"). At the effective time ("Effective Time") of the Merger, pursuant
to the Merger Agreement, FBS will change its name to First Interstate Bancorp
("New First Interstate") and Mr. Siart will become President and Chief Operating
Officer of New First Interstate. In addition, although not specifically required
by the Merger Agreement, it is anticipated that at New First Interstate, Mr.
Willison will serve as Vice Chairman, Corporate Banking and Linnet F. Deily will
serve as Vice Chairman, Retail Banking. Under certain benefit plans, severance
arrangements and other employment agreements maintained, or entered into, by
First Interstate, certain benefits may become vested or accelerated in
connection with the Merger with respect to Mr. Siart, Mr. Willison, other
directors of First Interstate, Ms. Deily, and the other participants. During the
period commencing on the Effective Time and continuing for not less than six
years thereafter, New First Interstate will, to the fullest extent permitted
under applicable law, have certain indemnification obligations to the
participants with respect to matters arising at or prior to the Effective Time
in connection with the Merger. First Interstate has absolute and sole discretion
in designating 10 of the 20 directors of New First Interstate. First Interstate
has not yet determined which other individuals it will designate to serve as
directors of First New Interstate. For further description of the foregoing
interests, see the Schedule 14D-9, dated and filed with the Securities and
Exchange Commission on November 20, 1995, including the exhibits thereto.
