Filed by SunTrust Banks, Inc.
Pursuant to Rule 425 under the Securities
Act of 1933 and deemed filed pursuant to
Rule 14a-12 under the Securities Exchange
Act of 1934
Subject Company: Wachovia Corporation
Commission File No. 1-9021
Date: July 24, 2001
This filing contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements include, but
are not limited to, (i) statements about the benefits of a merger between
SunTrust Banks, Inc. and Wachovia Corporation, including future financial and
operating results, cost savings and accretion to reported and cash earnings that
may be realized from such merger; (ii) statements with respect to SunTrust's
plans, objectives, expectations and intentions and other statements that are not
historical facts; and (iii) other statements identified by words such as
"believes", "expects", "anticipates", "estimates", "intends", "plans",
"targets", "projects" and similar expressions. These statements are based upon
the current beliefs and expectations of SunTrust's management and are subject to
significant risks and uncertainties. Actual results may differ from those set
forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ
materially from the anticipated results or other expectations expressed in the
forward-looking statements: (1) the businesses of SunTrust and Wachovia may not
be integrated successfully or such integration may be more difficult,
time-consuming or costly than expected; (2) expected revenue synergies and cost
savings from the merger may not be fully realized or realized within the
expected time frame; (3) revenues following the merger may be lower than
expected; (4) deposit attrition, operating costs, customer loss and business
disruption, including, without limitation, difficulties in maintaining
relationships with employees, customers, clients or suppliers, may be greater
than expected following the merger; (5) the regulatory approvals required for
the merger may not be obtained on the proposed terms or on the anticipated
schedule; (6) the failure of SunTrust's and Wachovia's stockholders to approve
the merger; (7) competitive pressures among depository and other financial
institutions may increase significantly and may have an effect on pricing,
spending, third-party relationships and revenues; (8) the strength of the United
States economy in general and the strength of the local economies in which the
combined company will conduct operations may be different than expected,
resulting in, among other things, a deterioration in credit quality or a reduced
demand for credit, including the resultant effect on the combined company's loan
portfolio and allowance for loan losses; (9) changes in the U.S. and foreign
legal and regulatory framework; and (10) adverse conditions in the stock market,
the public debt market and other capital markets (including changes in interest
rate conditions) and the impact of such conditions on the combined company's
capital markets and asset management activities. Additional factors that could
cause SunTrust's results to differ materially from those described in the
forward-looking statements can be found in SunTrust's reports (such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K) filed with the Securities and Exchange Commission and available at the
SEC's Internet site (http://www.sec.gov). All subsequent written and oral
forward-looking statements concerning the proposed transaction or other matters
attributable to SunTrust or any person acting on its behalf are expressly
qualified in their entirety by the cautionary statements above. SunTrust does
not undertake any obligation to update any forward-looking statement to reflect
circumstances or events that occur after the date the forward-looking statements
are made.
THE FOLLOWING LETTER WILL BE SENT TO WACHOVIA SHAREHOLDERS.
[SunTrust Logo Omitted]
July 24, 2001
Dear Wachovia Shareholder:
The vote on the First Union merger proposal at Wachovia's August 3
shareholders' meeting is now only days away, and this may be your last
opportunity to secure a better deal by voting "AGAINST" that merger. Even if
you previously voted in favor of the First Union merger proposal, you can still
change your vote. To vote "AGAINST" the merger, simply sign, date and return
the enclosed BLUE proxy card. TIME IS SHORT -- ACT TODAY.
With the voting deadline rapidly approaching, we thought it would be
helpful to summarize what we see as the ten major reasons for Wachovia
shareholders to reject the First Union merger proposal:
1. SUNTRUST PROVIDES SUPERIOR VALUE
The numbers don't lie. SunTrust's merger proposal has had a higher value
than the First Union merger proposal every day since our merger proposal was
announced more than 10 weeks ago. Based on July 23, 2001 closing prices,
SunTrust's merger proposal represents an AGGREGATE PREMIUM TO WACHOVIA
SHAREHOLDERS OF APPROXIMATELY $800 MILLION over the implied value of the
proposed First Union merger. While these values fluctuate daily with changes in
the market value of SunTrust's and First Union's shares, as recently as July
17, 2001 SunTrust's merger proposal represented an AGGREGATE PREMIUM OF MORE
THAN $1 BILLION over the implied value of the proposed First Union merger.
2. SUNTRUST'S SIMPLER AND BETTER DIVIDEND
SunTrust's dividend proposal is simple and straightforward. We would
increase our dividend so that on a pro forma basis you would receive the same
$2.40 per share dividend you currently receive from Wachovia. And just as
importantly, WHEN SUNTRUST'S DIVIDEND INCREASES, YOU WOULD PARTICIPATE IN THAT
DIVIDEND INCREASE FROM THE FIRST CENT ON UP.
Under First Union's complex dividend plan, the current annual dividend
rate on your common stock will fall from $2.40 per share to $1.92 per share on
a pro forma basis -- $0.48 per share less than you currently receive from
Wachovia. Because of this, First Union is offering a choice of an additional
$0.48 per share payment in the first year only or a new and complicated
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THE NORTH CAROLINA BUSINESS COURT RECENTLY RULED THAT WACHOVIA'S DIRECTORS
BREACHED THEIR FIDUCIARY DUTY TO YOU BY AGREEING TO A "COERCIVE"
NON-TERMINATION PROVISION IN THE FIRST UNION MERGER AGREEMENT. AS DESCRIBED
IN PARAGRAPH 10 OF THIS LETTER, THAT PROVISION WAS INVALIDATED BY THE COURT.
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separate security that First Union calls a "DEP." THE PROBLEM WITH THE DEP, OF
COURSE, IS THAT IF FIRST UNION'S COMMON STOCK DIVIDEND GOES UP, THE PAYMENT ON
THE DEP GOES DOWN. First Union would have to increase its annual common stock
dividend payment by more than $0.48 per share, or 25%, before you receive the
first cent of any actual First Union dividend increase.
3. SUNTRUST'S SUPERIOR DIVIDEND HISTORY
SunTrust's dividend rate has increased every year since its formation in
1985. During the past five years, SunTrust's dividend increased from $0.83 per
share in 1996 to $1.60 per share today (on an annualized basis) -- an increase
during the five-year period of 93%. Over the same five-year period, First
Union's dividend fell from $1.10 per share in 1996 to only $0.96 per share
today (on an annualized basis). And earlier this year, FIRST UNION SURPRISED
ITS SHAREHOLDERS WITH A MASSIVE 50% CUT IN DIVIDENDS only weeks after First
Union's Chief Executive Officer said there was no need to cut the dividend.
4. SUNTRUST'S STRONGER EARNINGS AND REVENUE GROWTH
In 1996, First Union had core earnings per share of $3.10. The First Call
consensus estimate for 2001 is for First Union core earnings per share of $2.60
-- a $0.50 per share, or 16%, decrease. In contrast, comparable figures for
SunTrust show a 75% rise during the same period from $2.72 to $4.76 per share.
Similarly, in 1996, First Union had per share revenue of $13.11.
Annualizing its performance for the first half of 2001 leads to 2001 revenue of
$13.49 per share, an increase of less than 3% in five years. Comparable figures
for SunTrust during the same five year period show an increase from $11.58 to
$17.68, or an increase of 53%.
5. FIRST UNION'S POOR STOCK PRICE PERFORMANCE
At the start of 1999, First Union's stock price was $60.81. By the end of
1999, it was $32.94. Even today -- despite First Union's constant talk about
"restructuring," "revitalization," "new management" and "momentum," THE FACT IS
FIRST UNION'S STOCK PRICE IS ONLY $34.74 -- AN INCREASE OF BARELY 5% IN MORE
THAN 18 MONTHS SINCE THE END OF 1999.
6. FIRST UNION'S HIGH RISK PROFILE AND VOLATILE EARNINGS MIX
In contrast to SunTrust and Wachovia, First Union is engaged in higher
risk businesses resulting in a more volatile earnings mix. For example, First
Union is committed to investment banking on a national scale, a highly
competitive business where First Union has no competitive advantage. Its
corporate and investment banking operating earnings declined 45% from the first
quarter of 2000 to the second quarter of 2001. FIRST UNION ALSO HAS A MUCH MORE
RISKY BALANCE SHEET THAN SUNTRUST OR WACHOVIA. Notably, First Union has a
principal investing portfolio (including high risk technology venture capital
investments) totaling $3 billion at the beginning of 2001. WE DOUBT YOU
INTENDED TO INVEST IN A COMPANY WITH THIS TYPE OF RISK PROFILE WHEN YOU BOUGHT
YOUR WACHOVIA SHARES.
7. FIRST UNION'S HISTORY OF BUNGLED ACQUISITIONS
First Union always claims its major acquisitions will be successful, but
has a deeply disturbing history of overpredicting and underdelivering. When
First Union announced its proposed acquisition of CoreStates Financial Corp. in
November 1997, it presented illustrative post-acquisition 1999 earnings per
share of $4.46. When the acquisition was completed in 1998, First Union lost
19% of CoreStates customers and suffered major integration problems. And when
1999 came, First Union's operating earnings per share were only $3.40 -- 23.8%
LESS THAN FIRST UNION PRESENTED WHEN ANNOUNCING THE ACQUISITION.
In June 1998, First Union acquired The Money Store for $2.1 billion. The
acquisition turned out to be a complete failure and just two years later -- in
June 2000 -- First Union announced that The Money Store was being shut down.
THE MONEY STORE DEBACLE CONTRIBUTED TO RESTRUCTURING AND OTHER CHARGES OF $4.9
BILLION AGAINST FIRST UNION'S EARNINGS IN 2000 -- ONE OF THE LARGEST CHARGES
AGAINST EARNINGS IN THE HISTORY OF CORPORATE AMERICA.
8. FIRST UNION PLANS MORE JOB LOSSES AND BRANCH CLOSINGS
First Union already has increased its estimate of the number of Wachovia
bank branches it plans on shutting down. It now says it will close 325 Wachovia
branches -- almost half of Wachovia's existing bank branches. First Union also
plans on eliminating 7,000 jobs. In contrast, SunTrust expects to eliminate
3,000 fewer jobs and to close 150 to 175 fewer branches -- including no
merger-related closings in North Carolina and South Carolina.
9. FIRST UNION'S TRAMPLING OF SHAREHOLDER RIGHTS
First Union, in our view, has already shown a complete disregard for your
rights as a shareholder of Wachovia. In response to SunTrust's proposal for an
amendment to Wachovia's bylaws that would have allowed holders of 10% of
Wachovia shares to call a special meeting of shareholders, within a matter of
days First Union engineered a new law in North Carolina which effectively
eliminated the right of Wachovia shareholders to call a special meeting.
10. COURT THROWS OUT "COERCIVE" PROVISION IN FIRST UNION MERGER AGREEMENT
A recent decision of the North Carolina Business Court struck down a
"coercive" provision in the First Union merger agreement that would have
prevented Wachovia from entering into a merger agreement with SunTrust before
mid-January 2002. THE COURT'S DECISION MEANS THAT WACHOVIA AND SUNTRUST CAN NOW
BEGIN NEGOTIATING A MERGER AGREEMENT THE DAY WACHOVIA SHAREHOLDERS REJECT THE
PROPOSED FIRST UNION MERGER. This is an important victory for Wachovia
shareholders. In finding the merger agreement provision invalid and
unenforceable, the Court found the provision to be an "impermissible abrogation
of the duties of the Wachovia directors." The Court stated that by agreeing to
this provision, the Wachovia Board "impermissibly tied its hands" and "limited
their ability to perform their fiduciary duties." IT IS CLEAR THAT NEITHER
FIRST UNION NOR WACHOVIA WAS LOOKING OUT FOR YOUR INTERESTS WHEN THEY PUT THAT
INVALID PROVISION IN THEIR MERGER AGREEMENT.
We urge you to protect your investment and preserve your choices. Vote
"AGAINST" the First Union merger proposal by signing, dating and returning the
enclosed BLUE proxy card. Time is short, so please act today.
Thank you for your continued support.
Sincerely,
/s/ L. Phillip Humann
L. Phillip Humann
Chairman, President and
Chief Executive Officer
-------------------------------- IMPORTANT --------------------------------
If you have questions in voting your shares, please contact the firm
assisting us in the solicitation of proxies:
INNISFREE M&A INCORPORATED
TOLL-FREE SHAREHOLDER INFORMATION LINE: 1-877-750-9501
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SUPPLEMENTAL INFORMATION
RECENT DEVELOPMENTS -- CERTAIN LITIGATION
On July 20, 2001, the North Carolina Business Court declared invalid and
unenforceable a provision of the Merger Agreement between First Union and
Wachovia that would have prevented Wachovia from entering into a merger
agreement with SunTrust or any other party other than First Union before
January 16, 2002. As a result of this decision, Wachovia is in a position to
enter into negotiations with SunTrust or any other party immediately following
rejection of the proposed First Union merger by Wachovia shareholders. Also, on
July 20, 2001, the Court declined to preliminarily enjoin enforcement of First
Union's stock lock-up option or the filing of a certificate of merger.
--------------------
On May 14, 2001 SunTrust delivered a merger proposal to the Board of Directors
of Wachovia. Subject to future developments, SunTrust intends to file with the
SEC a registration statement at a date or dates subsequent hereto to register
the SunTrust shares to be issued in its proposed merger with Wachovia.
Investors and security holders are urged to read the registration statement
(when available) and any other relevant documents filed or to be filed with the
SEC, as well as any amendments or supplements to those documents, because they
contain (or will contain) important information. Investors and security holders
may obtain a free copy of the registration statement (when available) and such
other relevant documents at the SEC's Internet web site at www.sec.gov. The
registration statement (when available) and such other documents may also be
obtained free of charge from SunTrust by directing such request to: SunTrust,
303 Peachtree Street, N.E., Atlanta, GA 30308, Attention: Gary Peacock
(404-658-4753). This letter contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Factors that
could cause actual results to differ materially from the anticipated results or
other expectations expressed in the forward-looking statements can be found in
SunTrust's Proxy Statement filed with the SEC on June 25, 2001 and in
SunTrust's reports (such as Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K) filed with the SEC and available at
the SEC's Internet site (http://www.sec.gov).