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Wells Fargo taps Utah bank
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April 10, 2000: 3:01 p.m. ET
Acquisition of First Security tightens company's hold on Western bank market
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NEW YORK (CNNfn) - Wells Fargo & Co., the nation's No. 6 commercial bank, agreed Monday to acquire First Security Corp. for roughly $3 billion in stock, creating the largest commercial bank in one of the nation's fastest-growing regions.
San Francisco-based Wells Fargo said it would exchange 0.355 share of its stock for each outstanding share of First Security, a $23 billion bank based in Salt Lake City.
Based on Wells Fargo's Friday closing stock price of 39-3/4, the agreement carries an overall value of $2.9 billion, and values each First Security (FSCO: Research, Estimates) share at $14.11, a 16 percent premium over the bank's closing price of 12-3/16 Friday.
Wells Fargo (WFC: Research, Estimates) shares retreated slightly on the news, falling 11/16 to 39-1/16 by mid-afternoon Monday, while First Security added 1-1/16 to 13-1/4.
Spurned once, First Security returns to altar
The deal comes less than two weeks after crosstown rival Zions Bancorp (ZION: Research, Estimates) rejected First Security's $3.4 billion merger proposal after a bitter nine months of negotiations, instantly turning First Security from an acquirer to an acquisition target.
 Although it ranks among the top depository institutions in the West, First Security has been stung by a slowdown in mortgage banking revenue and pressure in its net interest margin, helping cause the bank's stock to plummet from its 52-week high of 31.
However, analysts said Wells Fargo's proven track record of turning troubled banking operations around should ease shareholder concerns about consuming the First Security operations.
"The whole debris left over from the Zions deal has certainly tainted the near-term outlook for First Security, and has demoralized the First Security employees," said Nancy Bush, a banking analyst with Prudential Securities. "However, I can tell you no one in this industry is better than Wells at cheerleading and at turning around franchises.
"It's a good geographic fit," she added. "Wells Fargo didn't have a lot in Utah and Utah is a very high-growth state. If you are going to be a Western bank, you have to be well-represented in Utah."
Banks will sell $1.2B in deposits
The companies hope to complete the transaction, which they say will be accretive to Wells Fargo's earnings per share results next year, during the second half of this year, pending shareholder and regulatory approvals. First Security earned $273.3 million last year.
Wells Fargo said it would incur $375 million in merger and integration charges related to the merger. The banks also intend to sell about $1.2 billion in deposits and associated loans to placate regulators and meet antitrust guidelines.
The deal will create the largest bank, in terms of deposits, in Utah, Nevada, New Mexico and Idaho -- areas where Wells Fargo does not have a significant presence. The merger helps further fortify Wells Fargo's grip on banking deposits in the western United States, where the bank already boasts more than 2,800 branches in 22 states.
The deal marks Wells Fargo's third banking acquisition of 2000 -- the others being Michigan Financial Corp. for $834 million, Nebraska's First Commerce Bancshares for $480 million and the National Bancorp of Alaska for $907 million.
An earlier version of this story indicated the merger agreement would have a set price value of $3.2 billion, or $15.50 per First Security share, based on information provided by a company spokesman. The company later corrected that statement to indicate the deal carries a fixed share exchange and not a fixed price. 
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