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):
October 27, 1998
WACHOVIA CORPORATION
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(Exact Name of Registrant as specified in its charter)
North Carolina No. 1-9021 No. 56-1473727
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(State or other jurisdiction of (Commission (IRS employer
incorporation) File Number) Identification No.)
100 North Main Street Winston-Salem, NC 27101
191 Peachtree Street NE, Atlanta, GA 30303
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
Winston-Salem 336-770-5000
Atlanta 404-332-5000
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Not applicable
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(Registrant's former address of principal executive offices)
<PAGE>
Item 5. Other Events.
On October 27, 1997, Wachovia Corporation, a North Carolina corporation
(the "Registrant"), entered into an Agreement and Plan of Merger by and between
the Registrant and Interstate/Johnson Lane, Inc., a Delaware corporation
("IJL"), for a tax-free merger of the two companies pursuant to which each
outstanding share of common stock, par value $0.20 per share, of IJL would be
converted into the number of shares of Wachovia's common stock par value $5.00
per share equal to $32.00 divided by Wachovia's average stock price for the five
trading days preceding the effective date of the Merger.
This current report on Form 8-K, including the investor materials,
contains certain forward looking statements with respect to the financial
condition, results of operations and business of Wachovia and the combined
company, including statements relating to: (a) the cost savings and reported
earnings that will be realized from the Proposed Merger; (b) the impact on
revenues of the Proposed Merger; and (c) the restructuring charges expected to
be incurred in connection with the Proposed Merger. These forward looking
statements involve certain risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated by such forward
looking statements include, among others, the following possibilities: (1)
expected costs savings from the Proposed Merger cannot be fully realized or
realized within the expected time frame; (2) costs or difficulties related to
the integration of the businesses of Wachovia and IJL are greater than expected;
(3) revenues following the Proposed Merger are lower than expected; (4)
competitive pressure among depository institutions increases significantly; (5)
changes in the interest rate environment reduce interest margins; (6) general
economic conditions, either nationally or in the states in which the combined
company will be doing business, are less favorable than expected; or (7)
legislation or regulatory changes adversely affect the businesses in which the
combined company would be engaged.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
99.1 Press release dated October 27, 1998 announcing the
Proposed Merger.
99.2 Investor presentation materials distributed by the
Registrant on October 27, 1998 relating to the Proposed
Merger.
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<PAGE>
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.
Date: October 28, 1998
WACHOVIA CORPORATION
By: /s/ Kenneth W. McAllister
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Name: Kenneth W. McAllister
Title: Senior Executive Vice
President
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<PAGE>
Exhibit Index
99.1 Press release dated October 27, 1998 announcing the Proposed Merger.
99.2 Investor presentation materials distributed by the Registrant on
October 27, 1998 relating to the Proposed Merger.
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[WACHOVIA LOGO]
NEWS ANNOUNCEMENT Wachovia Corporation
Atlanta, GA 30383
Winston-Salem, NC 27150
For Additional Information:
Wachovia -- Ed L. Hutchins, 336-732-4200
IJL -- Jane P. Shoemaker, 704-379-9015
October 27, 1998
FOR RELEASE: Immediately
INTERSTATE/JOHNSON LANE TO MERGE WITH WACHOVIA
Wachovia Corporation and Interstate/Johnson Lane Inc. today announced
an agreement in which Interstate/Johnson Lane will merge with Wachovia.
Interstate/Johnson Lane is a full-service investment banking and securities
brokerage company based in Charlotte, N.C.
The agreement was approved today by the boards of directors of both
Interstate/Johnson Lane Inc. and Wachovia Corporation. The transaction, which is
subject to approval by IJL shareholders, the Federal Reserve and other
regulatory authorities, is expected to close in the first half of 1999.
The merger will be accounted for as a purchase. The merger agreement
provides for a tax-free exchange of Wachovia common shares for all shares of IJL
common stock. The per share exchange ratio will be determined at the time of
closing and will be based on the ratio of $32 per IJL share to the average
closing price per share of Wachovia's common stock over the five trading days
prior to closing. The transaction is valued at $230 million. In addition,
Wachovia has established an employee retention pool of $23 million in restricted
stock for key employees of IJL. Before pre-tax merger and integration charges of
$16 million in 1999, the transaction is expected to be nondilutive to Wachovia's
earnings in 1999 and accretive to earnings in 2000 and beyond.
Wachovia intends to repurchase in the open market or otherwise a number
of shares of Wachovia common stock approximately equal to the number of shares
issued in the merger. These repurchases will be in addition to Wachovia's
previously announced repurchase plan. In addition, Wachovia may purchase shares
of common stock of IJL as well pending consummation of the merger.
IJL will give Wachovia full-service brokerage capabilities through its
63 Private Client Group offices in the Carolinas, Georgia and Virginia. CapTrust
Financial Advisors LLC, an IJL subsidiary, provides investment consulting and
brokerage services in these and other geographic markets. IJL's equity research,
investment banking and established institutional equity and fixed income
distribution businesses will complement Wachovia's growing capital markets
activities.
-more-
<PAGE>
"IJL will strengthen Wachovia's relationship approach to serving our
customers by adding full service brokerage services. IJL financial consultants
will become part of Wachovia's network of financial, investment management,
insurance and estate planning specialists," said L. M. Baker Jr., Wachovia's
chief executive officer. "In addition, IJL will add valuable equity research,
underwriting and sales capabilities for Wachovia's rapidly growing capital
markets business line."
"IJL has a long tradition of building close relationships and giving
every client personal attention," said James H. Morgan, chairman and chief
executive officer of IJL. "Wachovia, too, possesses a relationship-oriented
culture. By combining our talents, strengths and resources in this strategic
combination, we can provide superior value for our shareholders and a wider
range of financial services to the individuals, corporations and institutions we
serve."
Upon closing, IJL will be integrated into Wachovia through a new
broker-dealer subsidiary with Morgan as chief executive officer. The subsidiary,
which will be known as Wachovia Securities Inc., is expected to include the
activities of Interstate/Johnson Lane, CapTrust and all Section 20 activities of
Wachovia's Capital Markets Division.
The companies expect that the growth potential of the combined company
together with natural attrition will result in minimal job loss.
In connection with the merger, IJL issued to Wachovia an option to
purchase up to 19.9 percent of IJL's stock under certain circumstances. In
addition, directors and executive officers of IJL controlling over 27 percent of
IJL's outstanding shares have agreed to vote in favor of the merger.
Headquartered in Charlotte, IJL is a regional financial services firm
whose subsidiaries provide securities brokerage, investment banking and
underwriting, and investment consulting services to individuals, institutions,
municipalities and corporations. Its principal operating unit,
Interstate/Johnson Lane Corporation, is one of the largest full-service
broker-dealers headquartered in the Southeast. It is a member of SIPC and The
New York Stock Exchange.
Wachovia Corporation is an interstate bank holding company with dual
headquarters in Atlanta and Winton-Salem, N.C. As of September 30, 1998,
Wachovia Corporation had assets of $65.6 billion. Wachovia Bank, N.A. provides
consumer banking services through more than 750 offices and 1,300 ATMs in
Florida, Georgia, North Carolina, South Carolina and Virginia. Wachovia offers a
broad range of credit, specialized finance, capital markets, investment and
processing services tailored to meet the needs of companies of all sizes.
WACHOVIA
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ACQUISITION OF
INTERSTATE/JOHNSON LANE
OCTOBER 27, 1998
<PAGE>
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This presentation contains certain forward looking statements with respect to
the financial condition, results of operations and business of Wachovia
after its merger with IJL including statements relating to: (a) the cost
savings and reported earnings that will be realized from the proposed
merger; (b) the impact on revenues of the proposed merger; and (c) the
restructuring charges expected to be incurred in connection with the
proposed merger. These forward looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ materially
from those contemplated by such forward looking statements include, among
others, the following possibilities: (1) expected costs savings from the
proposed merger cannot be fully realized or realized within the expected
time frame; (2) costs or difficulties related to the integration of the
businesses of Wachovia and IJL are greater than expected; (3) revenues
following the proposed merger are lower than expected; (4) competitive
pressure among financial institutions increases significantly; (5) changes
in the interest rate environment reduce interest margins; (6) general
economic conditions, either nationally or in the states in which the
combined company will be doing business, and conditions in securities
markets are less favorable than expected; or (7) legislation or regulatory
changes adversely affect the businesses in which Wachovia will be engaged.
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<PAGE>
STRATEGIC RATIONALE
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o Expands product capabilities in target growth markets
-- Enhances retail brokerage distribution network
-- Strengthens capital market position and adds equity capabilities
o Creates cross-sell opportunities
o Combines complementary products, cultures and geographic regions
o Pricing compares favorably to recent transactions
o Provides attractive returns
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<PAGE>
TRANSACTION SUMMARY
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Price Per Share: $32.00 of Wachovia common stock for each IJL share
Purchase Price: Approximately $230 million
Form of Consideration: Tax free exchange of WB stock. Approximately 2.65
million total shares of WB to be issued based on
current market price
Exchange Ratio: The number of shares issued per IJL share will equal
$32.00 divided by the average of the final trading
price for Wachovia common stock during the five
trading days prior to closing.
Retention Program: Approximately $23 million in restricted stock
Accounting Method: Purchase
Expected Closing: First Half 1999
Stock Repurchase: 100% of shares issued in transaction
Deal Protection: Voting agreement and 19.9% stock option
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<PAGE>
OVERVIEW OF IJL
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Brokerage Services
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o Experienced retail sales force of 466 financial consultants in 63 branches
across the Southeast
o Over 124,000 active retail accounts with client assets aggregating more
than $16.8 billion
Corporate and Institutional Business
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o Rapidly growing institutional sales and trading business
o Small, focused investment banking effort targeting middle-market
companies in the Southeast
Research Capabilities
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o Proprietary equity research capabilities with analysts covering over
140 companies
o Leading provider of third-party institutional research
o Market maker in over 200 NASDAQ stocks
Customer Focus
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o Strong client driven culture
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<PAGE>
COMPLEMENTARY PRODUCTS
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Wachovia IJL
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Full Service Brokerage X
Mutual Funds X
Insurance Sales X
Financial Planning X X
Private Banking X
Trust Services and Estate Planning X
Equity Underwriting, Sales & Trading X
Fixed Income Underwriting, Sales & X X
Trading
Equity Research X
M&A Advisory X X
Loan Syndications X
Derivatives X
Private Equity X X
Private Placements X X
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<PAGE>
ADDS UNDERWRITING CAPABILITIES
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IJL Lead and Co-Managed Financings 1993-1998 YTD(a)
[GRAPH]
TITLE: EQUITY AND EQUITY LINKED(b)
Amount Raised Number of Deals
($ in Millions)
--------------- ---------------
1993 $560.1 15
1994 $472.3 9
1995 $534.4 8
1996 $361.7 8
1997 $657.4 12
1998 YTD(a) $338.5 6
[SECOND GRAPH]
TITLE: MUNICIPAL FINANCE
Amount Raised Number of Deals
($ in Millions)
--------------- ---------------
1993 $112.7 13
1994 $165.8 26
1995 $173.1 12
1996 $426.9 26
1997 $233.9 16
1998 YTD(a) $431.4 27
Source: Securities Data Corporation. Data includes all
offerings in the domestic public and private market
by U.S. issuers.
(a) Through September 30, 1998.
(b) Excludes closed-end funds.
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<PAGE>
EXCELLENT GEOGRAPHIC FIT
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[GRAPHIC DEPICTING THE SOUTHEASTERN UNITED STATES
AND LOCATIONS OF IJL BRANCHES WITHIN THE REGION]
o IJL provides enhanced distribution in Wachovia's core markets.
o IJL has 63 branches in 58 cities and municipalities in North Carolina,
South Carolina, Georgia and Virginia
o Greater access and broader product offering to affluent individuals, as
well as, small and mid-sized companies in Southeast
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<PAGE>
STRUCTURE/MANAGEMENT
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o IJL's principal broker dealer subsidiary, Interstate/Johnson Lane
Corporation, will be merged into Wachovia Securities, Inc., a newly created
subsidiary of Wachovia Corporation
o As CEO of Wachovia Securities, Inc., Jim Morgan will be responsible for
Wachovia's Capital Markets activities and report to John McLean, EVP
o IJL's Private Client Group and CapTrust will report to Bob Kniejski, EVP
and head of Personal Financial Services
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<PAGE>
IJL -- SUMMARY FINANCIAL INFORMATION
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(Dollars in Millions)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
1994 1995 1996 1997 1998
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET REVENUES $147.9 $151.5 $187.6 $213.7 $257.6
Total Operating Expenses 134.6 141.6 170.8 193.9 229.0
-------- ------- ------- ------- -------
Pre-Tax Core Operating Income $13.3 $9.9 $16.8 $19.8 $28.6
LTIP Expense(a) 0 0 1.2 2.7 5.4
NET INCOME $10.9 $5.9 $9.4 $10.9 $14.7
-------- ------- ------- ------- -------
PROFITABILITY RATIOS
Pre-Tax Margin 9.0% 6.5% 8.3% 8.0% 9.0%
Pre-Tax ROAE 20.6 14.4 21.4 20.6 24.1
Adjusted for LTIP(a)
Pre-Tax Margin 9.0% 6.5% 9.0% 9.2% 11.1%
Pre-Tax ROAE 20.6 14.4 23.0 23.9 29.7
Total Assets $767.8 $616.5 $568.3 $626.7 $652.3
Total Shareholder's Equity 68.0 69.4 76.6 88.8 103.6
<FN>
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(a) Long-Term Incentive Plan expense of $5.4 million in 1998. The LTIP expired
in September 1998 and this strategic transaction causes automatic vesting
and termination.
</FN>
</TABLE>
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<PAGE>
IJL -- REVENUE SOURCES
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Total Revenues by Business Unit for Fiscal Year Ended September 30, 1998
[PIE CHART]
Private Client Group 61.2%
Fixed Income Capital Markets 17.8%
Equity Capital Markets 8.5%
The Interstate Group (Third-Party Research Services) 5.6%
Cap Trust Financial Advisors 4.1%
Other 2.8%
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<PAGE>
FAVORABLE PRICING RELATIVE TO RECENT BROKERAGE TRANSACTIONS
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Acquisitions of Retail Brokerage Firms 1997 - 1998YTD
<TABLE>
<CAPTION>
PURCHASE PRICE(a) AS A MULTIPLE OF:
----------------------------------------
TRANSACTION
DATE OF AMOUNT LTM NET TANGIBLE NET
ANNC. ACQUIROR TARGET ($MIL) INCOME BOOK VALUE REVENUES
- -------- ------------------ ----------------------- -------------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
8/20/98 PNC Corp. Hilliard-Lyons $315.0 15.80x 2.67x 1.96x
8/10/98 BB&T Corp. Scott & Stringfellow 145.8 23.00 3.76 1.40
6/15/98 KeyCorp. McDonald & Co. 721.0 18.98 3.64 2.19
12/15/97 US Bancorp Piper Jaffray Cos. 730.0 20.40(b) 4.20 1.20
11/19/97 First Chicago NBD Roney & Co. 95.0 17.00 3.83 NA
8/20/97 First Union Corp. Wheat First Butcher Singer 546.0 15.00 3.35 1.00
------------------------------------------------------------------
High 23.00x 4.20x 2.19x
Mean 18.36 3.57 1.55
Median 17.99 3.70 1.40
Low 15.00 2.67 1.00
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IJL $240.8(c) 16.3x(d) 2.64x 0.93x
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<FN>
- --------------------
(a) Transaction value includes purchase price paid to shareholders and the net after-tax value of any
retention pool at an assumed discount rate.
(b) Based on Annualized 4Q EPS before non-recurring charges.
(c) Assumes a $230 million transaction value and the net after-tax present value of a $23 million retention
pool vesting over 3 years.
(d) Price/LTM net income multiple excluding LTIP expense would equal 13.3x.
</FN>
</TABLE>
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<PAGE>
FINANCIALLY ATTRACTIVE
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o Nondilutive to EPS in 1999 (before restructuring charge), moderately
accretive thereafter
o Returns will exceed cost of capital and enhance shareholder value
o Estimated pre-tax merger and integration expense of $16 million recognized
during 1999.
o Fully phased-in synergies of $11 million (after-tax) from combination of
cost savings and revenue growth
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