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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
Exhibit Index is on Page 3
Date of Report (Date of earliest event reported): November 18, 1997
CoreStates Financial Corp
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(Exact name of registrant as specified in its charter)
Pennsylvania 0-6879 23-1899716
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(State or other (Commission (IRS Employee
jurisdiction of File Number) Identification No.)
incorporation)
Centre Square West, 1500 Market Street
Philadelphia, Pennsylvania 19101
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(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code: (215) 973-7488
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(Former name and former address, if changed since last report)
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Item 5. Other Events.
On November 18, 1997, CoreStates Financial Corp ("CoreStates")
entered into an Agreement and Plan of Mergers (the "Merger Agreement"), which
provides, among other things, for the merger (the "Merger") of CoreStates into
First Union Corporation ("First Union"). Pursuant to the Merger Agreement,
each outstanding share of CoreStates common stock would be converted into 1.62
shares of First Union's common stock (the "Exchange Ratio"), subject to possible
adjustment under certain circumstances.
The Merger is intended to constitute a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended, and to be accounted for
as a pooling of interests. Consummation of the Merger is subject to various
conditions, including: (i) receipt of the approval of the Merger Agreement by
CoreStates' and First Union's stockholders, and approval by First Union's
stockholders of an amendment to First Union's Articles of Incorporation to
increase the number of authorized shares of First Union's common stock from
750,000,000 to 2,000,000,000; (ii) receipt of requisite regulatory approvals
from the Board of Governors of the Federal Reserve System and other federal and
state regulatory authorities; (iii) receipt of opinions as to the tax and
accounting treatment of certain aspects of the Merger; (iv) listing, subject to
notice of issuance, of First Union's common stock to be issued in the Merger;
and (v) satisfaction of certain other conditions.
In connection with the Merger Agreement, First Union and
CoreStates entered into the following Stock Option Agreements: (i) a stock
option agreement dated November 18, 1997 (the "CoreStates Stock Option
Agreement"), pursuant to which CoreStates granted to First Union an option to
purchase, under certain circumstances, up to 39,364,847 shares of CoreStates
common stock at a price, subject to certain adjustments, of $72.00 per share
(the "CoreStates Option"); and (ii) a stock option agreement dated November 18,
1997 (the "First Union Stock Option Agreement"), pursuant to which First Union
granted to CoreStates an option to purchase, under certain circumstances, up to
56,285,593 shares of First Union's common stock at a price, subject to certain
adjustments, of $52.00 per share (the "First Union Option") (collectively, the
"Option Agreements" and the "Options"). The CoreStates Option, if exercised,
would give the holder thereof the right to acquire, before giving effect to the
exercise of the CoreStates Option, up to 19.9% of the total number of shares of
CoreStates' common stock outstanding. The First Union Option, if exercised,
would give the holder thereof the right to acquire, before giving effect to the
exercise of the First Union Option, up to 9.9% of the total number of shares of
First Union's common stock outstanding. The Option Agreements were granted by
the respective parties as conditions and inducements to each others' willingness
to enter into the Merger Agreement. Under certain circumstances, the respective
issuers of the Options may be required to repurchase the Options or the shares
acquired pursuant to the exercise thereof.
The Merger Agreement may be terminated under certain circumstances,
including by the Board of Directors of CoreStates by giving notice to First
Union if either (x) both (i) the average closing price of First Union's common
stock for the ten full trading days ending on the date the Federal Reserve Board
approves the Merger (the "Average Closing Price") is less than the product of
the closing price of First Union's common stock (the "Starting Price") on the
first full trading day after public announcement of execution of the Merger
Agreement (the "Starting Date") and 0.85, and (ii) the number obtained by
dividing the Average Closing Price by the Starting Price is less than the number
obtained by (a) dividing the weighted average of the closing prices of a
specified group index of bank stocks during the above-mentioned ten-day period
by the weighted average closing prices of such bank stocks on the Starting Date
and (b) subtracting 0.15, or (y) the Average Closing Price is less than the
product of the Starting Price and 0.75. In the event CoreStates gives notice of
its intent to terminate the Merger Agreement pursuant to the conditions set
forth in the preceding sentence, First Union may determine, in its sole
discretion, to increase the Exchange Ratio to eliminate CoreStates' right to
terminate the Merger Agreement.
A copy of a news release (the "News Release") relating to the Merger
is being filed as Exhibit (99) to this report and is incorporated herein by
reference.
Item 7. Exhibits.
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99 Corestates Financial Corp News Release dated November 18, 1997.
SIGNATURE
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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.
CORESTATES FINANCIAL CORP
(Registrant)
Dated: November 19, 1997 By /s/ David T. Walker
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David T. Walker
Senior Vice President
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Exhibit Index
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Exhibit No. Page
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99 CoreStates Financial Corp News
Release dated November 18, 1997 4
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Exhibit 99
CoreStates Financial Corp
Broad and Chestnut Streets
PO Box 7558
Philadelphia, PA 19101-7558
[LOGO OF CORESTATES APPEARS HERE]
Contact Gary Brooten or George Biechler
(215) 973-3546
For Release Immediately Upon Receipt
First Union and CoreStates Announce Merger Agreement
$204 Billion Company to be the Leading Bank on the East Coast
Philadelphia, PA, November 18, 1997 -- First Union Corporation (NYSE:FTU)
and CoreStates Financial Corp (NYSE:CFL) have signed a definitive merger
agreement that would create a $204 billion financial services company with the
leading banking presence on the Eastern Seaboard.
The combined company will have the largest share of retail deposits on the
East Coast, including the top market share in New Jersey and Pennsylvania, and
the leading share in the city of Philadelphia. With 2,766 offices serving 16
million customers, it will be the nation's sixth largest banking company. As of
September 30, 1997, Philadelphia-based CoreStates had assets of $47.6 billion.
"While this merger is important strategically, it also meets our financial
performance criteria by being cumulatively accretive within 18 months, said
Edward E. Crutchfield, chairman and chief executive officer of First Union Corp.
First Union expects to bring 3,000 new jobs to the Greater Philadelphia
Metropolitan Area as Philadelphia becomes the headquarters for the combined
five-state regional banking group, which includes Connecticut, New York,
Delaware, New Jersey and Pennsylvania. Philadelphia will also become the
headquarters for the combined corporate banking functions for the entire
corporation and a major center for the combined bank's customer service
operations. The new jobs are expected to
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significantly offset the impact of merger-related job reductions.
In addition to expanding the Philadelphia-based operations, First Union
will establish and fund a $100 million Foundation dedicated to enriching the
region CoreStates serves. The majority of the directors of the Foundation will
come from the CoreStates Board of Directors. The Foundation's Board of
Directors will be chaired by Terrence A. Larsen, the chairman and chief
executive officer of CoreStates.
First Union will also establish a $16 million Employee Training and
Development Fund to assist any displaced employees by providing additional
training for positions within First Union or other companies in the region.
"We are particularly pleased that First Union is demonstrating an
unwavering commitment to the growth and vitality of the region CoreStates
serves. CoreStates would only consider a merger that clearly enhanced our
ability to create superior long-term value for our customers, shareholders,
employees and the communities we serve," said Larsen. "Our combined
organization will enable us to leverage our expertise, products and customer
relationships in a powerful new way. Together, we will be unbeatable."
"CoreStates has established leadership positions in corporate banking,
international trade finance, cash management, small business banking, electronic
banking, retail banking and other key areas," said Edward E. Crutchfield,
chairman and chief executive officer of First Union Corp. "This merger will
create the premier banking organization on the East Coast."
First Union has agreed to exchange 1.62 shares of its common stock for
each share of CoreStates common stock. Based on First Union's closing stock
price of $51.75 on November 14, 1997, the transaction would be valued at $16.6
billion
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and represent an exchange value of $83.84 for each share of CoreStates common
stock.
First Union expects the merger to be cumulatively accretive to earnings
within 18 months. This estimate excludes estimated after-tax merger-related
restructuring charges of approximately $795 million which are anticipated to be
taken in the second quarter of 1998.
As with any earnings estimates, there are factors that could cause the
actual results to differ materially from such estimates, such as changes in
economic conditions and other factors indicated on a Form 8-K filed with the
Securities and Exchange Commission.
Following the merger, the Office of the Chairman will include Crutchfield
as chairman and chief executive officer, Larsen as vice chairman and First
Union's John Georgius as president. Six members of the CoreStates Corporate
Board of Directors will join the First Union Corporate Board.
In his role as First Union Corporation's vice chairman, Larsen will have
direct leadership responsibilities for the combined company's corporate banking
functions which include specialized industry lending, large corporate lending,
and capital markets businesses such as investment banking, merchant banking,
leasing, international, funds management and other key operations.
Larsen will also serve as chairman of the combined five-state Regional
Bank Board of Directors. As the senior officer for the regional bank, Larsen
will take responsibility for overseeing the effective integration into one
organization. The combined banking assets in the five-state region will total
approximately $80 billion.
The combined company will have the first, second or third largest share of
deposits in 21 of the 30 largest metropolitan areas on the East Coast.
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"First Union and CoreStates have very strong compatibility in overall
values as well as in the approach taken to customers. I intend to take every
opportunity to reinforce our focus on customer needs and to build on our
relationships with customers and all of our stakeholders," Larsen said.
The merger, which will be accounted for as a pooling of interests, is
expected to be consummated by April 30, 1998, pending CoreStates and First Union
shareholder approval, regulatory approval and other customary conditions of
closing. In connection with the execution of the merger agreement, CoreStates
granted First Union an option to purchase, under certain circumstances, up to
19.9 percent of CoreStates' outstanding shares of common stock. In addition,
First Union granted CoreStates an option to purchase, under certain
circumstances, up to 9.9 percent of First Union's outstanding shares of common
stock.
Media contacts are Tish Signet and Mary Eshet of First Union at 800-669-
5855, and Gary Brooten and George Biechler of CoreStates at 215-973-3546.
Investor contacts are Alice Lehman of First Union at 704-374-4139, and George
Karklins of CoreStates at 215-973-4185.
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