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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 18, 1995
FIRST UNION CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
NORTH CAROLINA 0-10000 56-0898180
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(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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ONE FIRST UNION CENTER
CHARLOTTE, NORTH CAROLINA 28288-0013
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (704)374-6565
(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
On June 18, 1995, First Union Corporation (the "Corporation") entered into
an Agreement and Plan of Merger (the "Agreement") with First Fidelity
Bancorporation ("First Fidelity"), which provides, among other things, for (i)
the merger (the "Merger") of First Fidelity with and into a wholly-owned
subsidiary of the Corporation, (ii) the exchange of each outstanding share of
First Fidelity common stock for 1.35 shares of the Corporation's common stock,
subject to adjustment under certain circumstances, and (iii) the exchange of
each share of the three outstanding series of First Fidelity preferred stock for
one share of a new series of the Corporation's Class A Preferred Stock
containing substantially identical terms to the series being exchanged therefor,
all subject to the terms and conditions contained in the Agreement.
In connection with the execution of the Agreement, this morning First
Fidelity granted an option to the Corporation to purchase, under certain
circumstances, up to 19.9% of the outstanding shares of First Fidelity common
stock at a per share exercise price equal to the last sale price of First
Fidelity common stock on the New York Stock Exchange Composite Transactions tape
on June 19, 1995 (but not less than $48.75), and the Corporation granted an
option to First Fidelity to purchase, under certain circumstances, up to 19.9%
of the outstanding shares of the Corporation's common stock at a per share
exercise price equal to the last sale price of the Corporation's common stock on
the New York Stock Exchange Composite Transactions tape on June 19, 1995.
Also, in connection with the execution of the Agreement, Banco
Santander, S.A., the owner of approximately 30% of the outstanding shares
of First Fidelity common stock, agreed, among other things, to vote the First
Fidelity shares held by it in favor of the Agreement.
Consummation of the Merger is subject to receipt of regulatory and
shareholder approvals, as well as other conditions set forth in the Agreement.
No assurance can be given that the Merger will be consummated.
On June 19, 1995, the Corporation issued a news release ("News Release")
relating to the Agreement and held a meeting (the "Meeting") with investment
analysts with respect thereto. At the Meeting certain financial and other
information was presented. The News Release and the information presented at the
Meeting contained, among other things, information with respect to (i)
restructuring charges expected to be taken by the Corporation and First Fidelity
in connection with the Merger, and (ii) earnings estimates by First Union for
the second quarter of 1995, and the years ended 1995 and 1996, based on various
assumptions.
Copies of the News Release and certain forward looking financial
information presented to the analysts at the Meeting are attached hereto as
Exhibits (99)(a) and (99)(b).
1
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST UNION CORPORATION
Date: June 19, 1995 By: /s/ Kent S. Hathaway
NAME: KENT S. HATHAWAY
TITLE: SENIOR VICE PRESIDENT
2
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
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(99)(a) News Release.
(99)(b) Certain forward looking financial
information presented at the Meeting.
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EXHIBIT (99)(A)
Monday
June 19, 1995
FIRST UNION AND FIRST FIDELITY ANNOUNCE GROUNDBREAKING MERGER THAT WILL
CREATE THE EAST COAST BANKING LEADER; FIRST UNION RELEASES EARNINGS ESTIMATES
FOR 1995-1996 AND INCREASES DIVIDEND
Charlotte, N.C. and Newark, N.J./Philadelphia, Pa. -- First Union
Corporation (NYSE:FTU) and First Fidelity Bancorporation (NYSE:FFB) have signed
a definitive merger agreement that would create the nation's sixth-largest bank
holding company based on total assets of $123.7 billion. The groundbreaking
merger will create the East Coast banking leader serving 10.5 million customers
through 2,000 offices in 13 states.
First Union has agreed to exchange 1.35 shares of its common stock for each
share of First Fidelity common stock. Based on First Union's closing stock price
of $47.625 on June 16, 1995, the transaction would be valued at approximately
$5.4 billion and represent an exchange value of $64.29 for each share of First
Fidelity common stock. The purchase price would be 1.92 times First Fidelity's
March 31, 1995 book value.
The merger, which will be accounted for as a pooling, is expected to be
consummated by Dec. 31, 1995, pending First Union and First Fidelity shareholder
approval, regulatory approval and other customary conditions of closing. The
merger is also expected to be a tax-free reorganization for federal income tax
purposes.
Prior to consummation, the companies plan to repurchase up to 5.5 million
First Fidelity shares or 7.4 million First Union shares, or some combination of
the two. Approximately 105 million shares of First Union common stock are
expected to be issued in the transaction.
Following consummation of the merger, First Union expects to exceed the
1996 analyst consensus estimate of $6.17 per share for First Union on a
stand-alone basis, with estimated earnings for the combined company in 1996 of
$6.31 per share. The earnings estimate assumes several factors, including the
expected financial benefits as the combined company leverages the delivery of
First Union's broader product line in the new markets and achieves expected
operating efficiencies.
First Union estimates the combined company will earn $5.29 per share for
1995, excluding an aggregate after-tax restructuring charge of $140 million, or
50 cents per share, to cover merger-related expenses.
First Union also issued an earnings estimate for the current quarter ending
June 30, 1995, of $1.40 to $1.45 per share for First Union on a stand-alone
basis, which would bring First Union's 6-month earnings to between $2.72 and
$2.77 per share.
As with any earnings estimates, there are factors beyond the company's
control that could influence the actual results for 1995-1996, such as changes
in economic conditions. As a result, the actual results could differ materially
from these estimates.
Based upon First Union's earnings momentum, the First Union board of
directors has approved the 18th consecutive annual increase in the cash dividend
on First Union's common stock. The quarterly dividend will increase 13 percent,
from 46 to 52 cents per share. On an annualized basis, the dividend rate will
increase from $1.84 to $2.08. The common stock dividend is payable Sept. 15,
1995 to holders of record as of Aug. 31, 1995.
First Union Chairman and Chief Executive Officer Edward E. Crutchfield and
First Fidelity Chairman and Chief Executive Officer Tony Terracciano explained
that the merger will combine two dynamic organizations with common visions and
strategy, and highly compatible management.
"Tony Terracciano's decision to combine with us is the highest compliment
ever paid to our company," Crutchfield said. "His talent, vision and track
record are superior in the banking industry."
"This is the right merger for both our companies at the right time," said
Terracciano. "By combining our market strengths and managerial talents, we can
take full advantage of technological developments, consolidation opportunities
and a changing financial services landscape to produce superior shareholder
returns both now, and into the next century."
Crutchfield announced that Terracciano will join him and First Union's John
R. Georgius in a new "Office of the Chairman" for the combined company.
Crutchfield will serve as chairman and chief executive officer, Terracciano will
serve as president, and Georgius will become vice chairman.
"With this merger, we will create the critical mass and business volume
needed to thrive as we compete head-on with non-banking companies in the
aggressive sale of card products, retail investment products and capital markets
services," said
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Georgius. "Our size and volume will allow us to spread the cost
of advanced delivery systems over a larger base, keep unit costs low and
increase our speed and flexibility."
The two companies already serve a region that includes four of the five
highest personal income areas in the country, with 35 percent of the U.S.
population. The market served by First Fidelity includes the greatest
concentration of middle-market companies in the nation.
Following the merger, fee income is expected to grow through the sale of a
diverse mix of investment products and financial services to business customers
and retail bank consumers in First Fidelity's markets. First Union has developed
an extensive offering of financial planning and investment services for
consumers, including a proprietary family of mutual funds and annuity products,
and has led the banking industry in training and developing its own in-house
investment sales force.
First Union formed a Capital Markets Group in 1994 to provide competitive
investment banking services, including loan syndications, private placements,
asset securitizations, and risk management products to middle-market companies
and large corporations. First Union is among a select group of banks that have
received approval from the Federal Reserve Board to underwrite corporate debt
and equities.
In addition to growing revenues, First Union estimates expense savings of
up to 5 percent from the combined operations, which reflects the expected
consolidation of staff positions and the leveraging of technology expenses
across a broader base. The combined company will operate under the First Union
name.
Banco Santander, the leading bank in Spain, owns approximately 30 percent,
or approximately 23.5 million shares of First Fidelity common stock, and has
agreed to vote the shares it holds in favor of the merger. Following the
merger, Banco Santander would hold approximately 11.4 percent of First Union's
outstanding shares. In connection with the merger, six First Fidelity corporate
directors, including Tony Terracciano and a representative of Banco Santander,
are expected to join First Union's corporate board.
Emilio Botin, Chairman and CEO of Banco Santander said, "We are very
pleased to become a major shareholder in the preeminent financial institution
that will result from the merger of First Union and First Fidelity. We look
forward to a fruitful investment in the new First Union under the leadership
of Ed Crutchfield."
In connection with the execution of the merger agreement, First Fidelity
granted First Union an option to purchase, under certain circumstances, up to
19.9 percent of First Fidelity's outstanding shares of common stock. First Union
also granted First Fidelity an option to purchase, under certain circumstances,
up to 19.9 percent of First Union's outstanding shares of common stock.
The merger agreement provides for each share of three series of First
Fidelity preferred stock, one of which is convertible into First Fidelity common
stock, to be exchanged for one share of a comparable series of First Union class
A preferred stock containing substantially identical terms as the related First
Fidelity series.
Newark, N.J./Philadelphia, Pa.-based First Fidelity Bancorporation is the
nation's 25th-largest bank holding company, with assets of approximately $35.4
billion as of March 31, 1995. The company has the largest share of deposits in
New Jersey, and the third-largest share of deposits in Westchester County, N.Y.,
Fairfield County, Conn., and the Philadelphia metropolitan area. First Fidelity
has 685 offices in New Jersey, Pennsylvania, New York, Connecticut, Delaware and
Maryland, with approximately 12,000 employees.
Charlotte, N.C.-based First Union Corporation is the nation's 9th-largest
bank holding company, with assets of approximately $88.3 billion (including
recently closed and pending acquisitions). First Union operates 1,287
full-service banking offices in North Carolina, South Carolina, Georgia,
Florida, Tennessee, Virginia, Maryland and Washington, D.C. First Union has the
largest share of deposits in North Carolina and the second-largest share of
deposits in Florida. First Union has the first, second or third-largest share of
deposits in Washington, D.C., Charlotte, Atlanta, Jacksonville, Tampa-St.
Petersburg, Orlando, Miami and other key metropolitan areas in the South
Atlantic. First Union has approximately 32,000 employees.
Media contacts are Marianna Sheridan of First Union at 704-383-3715
(office) and 704-333-6447 (home), and Paul Levine of First Fidelity at
201-565-2949 (office) and 610-525-7520 (home). Investor contacts are Leah Long
of First Union at 704-374-4353, and Laura Schaible of First Fidelity at
201-565-3397.
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EXHIBIT (99)(B)
FIRST UNION CORPORATION
EARNINGS PER SHARE (1)
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1995 EST. 1996 EST. 1997 (5)
$MM EPS $MM EPS $MM EPS
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1 First Union........................................................ 1,006 $ 5.75 1,172 $ 6.55 1,289 $ 7.20
2 First Fidelity..................................................... 459 $ 5.45 494 $ 5.90 543 $ 6.48
ADJUSTMENT TO EARNINGS
3 Expense Efficiencies............................................... 10 64 91
4 Revenue Enhancements............................................... -- 48 74
5 Excess Capital Utilization......................................... -- 15 55
6 Total Adjustments.................................................. 10 127 220
7 Total on New Shares (2)(3)(4)...................................... 1,475 $ 5.29 1,793 $ 6.31 2,052 $ 7.23
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(1) 1995 and 1996 earnings per share are estimated. Like all estimates of this
type, there are many factors, such as changes in economic conditions, that
are beyond our control. These factors could affect actual results. As a
result, there will be differences between such estimates and the actual
results, which could be material. These estimates are necessarily
speculative in nature and no assurance can be given that these estimates
will be realized.
(2) Excludes the impact of reduced FDIC insurance from 23 cents to 4 cents. The
impact of this reduction on the combined company is estimated to be
approximately 15 cents per share in '95 and 30 cents per share thereafter.
(3) Excludes 1995 after-tax one-time merger expenses of $140 million or 50 cents
per share.
(4) Assumes 279 million shares in 1995, and 284 million shares in 1996 and 1997.
(5) 1997 earnings per share are not estimated. Such earnings are presented for
illustrative purposes only and are based upon the estimated 1996 earnings
per share plus 10%.
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ESTIMATED INCREMENTAL REVENUE (1)
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1996 1997 1998
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($ MILLIONS)
Capital Markets Products (Excluding risk management products)........................................ 21 46 65
Risk Management Products............................................................................. 6 13 19
Dealer Division...................................................................................... 5 13 19
International........................................................................................ 9 10 10
Total Capital Markets................................................................................ 41 82 113
Capital Management/Trust............................................................................. 17 18 19
Card Products........................................................................................ 11 11 11
Insurance............................................................................................ 4 4 4
Other................................................................................................ 6 7 8
Total Pre-Tax........................................................................................ 79 122 155
After-Tax.......................................................................................... 48 74 94
EPS Impact........................................................................................... $0.17 $0.26 $0.33
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(1) Like all estimates of this type, there are many factors, such as changes in
economic conditions, that are beyond our control. These factors could affect
actual results. As a result, there will be differences between such
estimates and the actual results, which could be material. These estimates
are necessarily speculative in nature and no assurance can be given that
these estimates will be realized. These estimates assume the transaction
will close on 12/31/95.
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ESTIMATED EXPENSE SAVINGS (1)
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1995 1996 1997 1998
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($ MILLIONS)
Automation & Operations...................................................................... 4 37 55 68
General Banking.............................................................................. 3 23 27 33
Capital Markets.............................................................................. 1 12 16 19
Marketing.................................................................................... 2 11 13 17
Consumer Lending............................................................................. 2 7 7 9
Corporate Real Estate........................................................................ 2 6 9 12
Finance...................................................................................... 1 3 7 10
Mortgage Banking............................................................................. 0 3 7 10
Purchasing................................................................................... 0 3 6 8
Other........................................................................................ 1 1 2 3
Total Pre-Tax................................................................................ 16 106 149 189
After-Tax.................................................................................. 10 64 91 115
EPS Impact................................................................................... $.03 $0.23 $0.32 $0.40
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(1) Like all estimates of this type, there are many factors, such as changes in
economic conditions, that are beyond our control. These factors could affect
actual results. As a result, there will be differences between such
estimates and the actual results, which could be material. These estimates
are necessarily speculative in nature and no assurance can be given that
these estimates will be realized. These estimates assume the transaction
will close on 12/31/95.
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ESTIMATED EXCESS CAPITAL UTILIZATION (1)
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1996 1997 1998
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($ MILLIONS)
Pre-Tax................................................................................................. $ 25 $ 90 $132
After-Tax............................................................................................... $ 15 $ 55 $ 80
EPS..................................................................................................... $.05 $.19 $.28
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(1) Like all estimates of this type, there are many factors, such as changes in
economic conditions, that are beyond our control. These factors could affect
actual results. As a result, there will be differences between such
estimates and the actual results, which could be material. These estimates
are necessarily speculative in nature and no assurance can be given that
these estimates will be realized.
