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: June 28, 2001
The following is a letter sent to Wachovia Shareholders
[SunTrust LOGO]
June 28, 2001
Dear Wachovia Shareholder:
Your vote on Wachovia's proposed merger with First Union is extremely
important. In fact, it could be critical to the future value of your investment
in Wachovia's shares. The issue, we believe, is clear: Do you want to risk your
investment on First Union's promises or do you want Wachovia to enter into good
faith negotiations with SunTrust for a merger we believe will be superior to a
combination with First Union.
The answer, in our opinion, is equally clear. YOU CAN HELP DEFEAT THE
FIRST UNION MERGER BY VOTING "AGAINST" PROPOSAL NO. 1 ON THE ENCLOSED BLUE
PROXY CARD. At the same time, your vote "AGAINST" the First Union merger will
send a clear and unequivocal message to the Wachovia Board and management that
you want Wachovia to come to the table and negotiate in good faith with
SunTrust.
Based on June 27, 2001 closing prices, SUNTRUST'S MERGER PROPOSAL
REPRESENTS AN AGGREGATE PREMIUM OF APPROXIMATELY $413,000,000 OVER THE IMPLIED
VALUE OF FIRST UNION'S PROPOSAL. And with SunTrust's merger proposal you retain
your current dividend without having to own a separate security which, even
First Union admits, may not qualify for listing, trading or quotation on any
exchange or dealer quotation system.
But the advantages of a SunTrust/Wachovia combination are not just in the
numbers. SunTrust is a top quality Southeastern financial institution with a
commitment to good management, local markets, quality service and
relationship-based banking. SunTrust's commitments translate into results for
shareholders -- strong stock performance, dividend growth, a high-quality
balance sheet and earnings growth. That is why we believe our merger proposal
offers you a superior merger with a superior partner at superior value.
TWO RECENT FIRST UNION ACQUISITIONS:
BAD AND WORSE
With great fanfare, in April 1998, First Union acquired CoreStates
Financial Corp., a Pennsylvania-based bank holding company. When First Union
announced the deal, it projected its 1999 earnings per share at $4.46. But
significant problems followed. FIRST UNION LOST 19% OF CORESTATES' CUSTOMERS
AND SUFFERED MAJOR INTEGRATION PROBLEMS. This fumble and other difficulties
caused First Union to revise its earnings estimates downward twice in 1999, and
when the final results were in, earnings per share were only $3.40 -- a
dramatic 23.8% below First Union's original estimate.
First Union's acquisition of The Money Store was even worse. Having
acquired The Money Store in June 1998, First Union announced in June 2000 that
it was shutting it 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.
NOT SURPRISINGLY, FIRST UNION SHAREHOLDERS PAID DEARLY FOR THESE MISTAKES
WHEN FIRST UNION CUT ITS PER SHARE DIVIDEND IN HALF IN THE FIRST QUARTER OF
2001. And you should know that this major slash in dividends was announced less
than two months after First Union CEO Ken Thompson, in referring to First
Union's consideration of its dividend rate, was quoted in the press as stating
"we've got plenty of capacity to generate all of the capital we need in this
company. At the end of the day, we didn't need to cut the dividend." DO YOU
REALLY BELIEVE THAT FIRST UNION WILL DELIVER THE DIVIDEND THEY HAVE PROMISED
YOU?
SUNTRUST: RESULTS YOU CAN COUNT ON
We believe First Union cannot be relied upon to protect and enhance your
investments. In contrast, SunTrust has a record of proven results. Consider the
following:
o SUPERIOR PERFORMANCE. Through March 31, 2001, SunTrust had one-year,
five-year and ten-year total returns to shareholders (with reinvestment
of dividends) of 15.3%, 98.2% and 493.0%, respectively.
In sharp contrast, First Union's returns (with reinvestment of dividends)
were negative 6.2%, and 31.1% and 376.5%, respectively, for the same
periods.
o DIVIDEND GROWTH. SunTrust has increased its per share dividend every
year for the past 16 years. From 1996 to 2001 (annualizing our first
quarter 2001 dividend), our dividend increases represent a compounded
annual growth rate of 14%.
In sharp contrast, during the same period, First Union's cash dividend
dropped from $1.10 in 1996 to $0.96 in 2001 (annualizing First Union's
first quarter 2001 dividend) -- a negative 3% compounded annual growth
rate.
o FINANCIAL STRENGTH AND CREDIT QUALITY. As of March 31, 2001, SunTrust
had a tangible common equity ratio, a key measure of capital strength
(the higher the better), of 6.8%, and SunTrust's net charge-off ratio and
non-performing asset ratio, two key measures of credit quality (the lower
the better), were 0.38% and 0.52%, respectively.
In contrast, First Union's tangible common equity ratio is 5%, well below
SunTrust's (the higher the better), and First Union's net charge-off
ratio and non-performing asset ratio were 0.53% and 1.30%, respectively,
markedly higher than SunTrust's (the lower the better).
o EARNINGS GROWTH. Based on historical results and consensus analyst
estimates for 2001, SunTrust's core earnings per share -- which we
believe is the most important measure of corporate earnings performance
-- grew at a compounded annual rate of 12% from 1996-2001 (excluding
restructuring and merger-related charges and other non-recurring items).
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In contrast, First Union's core earnings per share have a five-year
compounded annual growth rate of negative 4% (excluding restructuring and
merger-related charges and other non-recurring items).
FIRST UNION: TRAMPLING SHAREHOLDER RIGHTS
First Union, in our view, already has shown a complete disregard for your
rights as a shareholder of Wachovia. Earlier this month, SunTrust, acting in
accordance with Wachovia's bylaws and then-existing North Carolina law,
submitted a proposal to be voted on at Wachovia's upcoming meeting of
shareholders. This proposal, if approved by a majority of Wachovia
shareholders, would have permitted the holders of 10% of Wachovia shares to
call a special meeting of shareholders.
This was a "good governance" proposal and would have conferred on Wachovia
shareholders a right specifically provided for under North Carolina law.
But First Union did not want you to have this fundamental shareholder
right. First Union, with the assistance of Wachovia's management, initiated and
lobbied for an immediate change in North Carolina law. In only a matter of
days, FIRST UNION ENGINEERED A NEW LAW -- FOUND IN NO OTHER STATE IN THE
COUNTRY -- which says that shareholders have absolutely no right to call a
special meeting unless specifically authorized to do so by the corporation's
articles of incorporation. Since North Carolina law already provided that
articles of incorporation can be amended only with prior approval of the
corporation's board of directors, THIS NEW LAW EFFECTIVELY SLAMMED THE DOOR ON
THE ABILITY OF WACHOVIA SHAREHOLDERS TO CALL A MEETING -- EVEN IF THE HOLDERS
OF A MAJORITY OF WACHOVIA'S STOCK WANTED TO DO SO.
THE LARGEST SHAREHOLDER ON WACHOVIA'S BOARD
OPPOSED WACHOVIA'S REJECTION OF SUNTRUST'S BID
Morris Offit, a Wachovia director and chief executive officer of its high
net worth asset management subsidiary, dissented from the board's decision to
reject the SunTrust merger proposal. According to Wachovia's own proxy
statement, Mr. Offit dissented based on:
"his view that he was more comfortable with the SunTrust business model,
which he viewed as more retail-oriented compared to the First Union model
with its greater emphasis on capital markets activities; and his view
that the cultural fit with SunTrust was better because of its focus on
relationship-based banking while he regarded First Union as more focused
on transactional-based services."
Excluding unexercised stock options and other unvested stock-based
compensation, Mr. Offit owns almost twice as many shares as all other Wachovia
directors combined. With his significant stock ownership in Wachovia, we
believe Mr. Offit is the director whose interests are most clearly aligned with
yours.
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THE FUTURE VALUE OF YOUR INVESTMENT
HANGS IN THE BALANCE
YOUR VOTE AGAINST THE FIRST UNION/WACHOVIA MERGER IS THE CRUCIAL FIRST
STEP TO SECURING THE BENEFITS OF THE SUNTRUST/WACHOVIA MERGER. Send a strong
message to the Wachovia board by voting AGAINST the First Union merger
proposal. Your vote is important no matter how many or how few shares you may
own. Please sign and date the enclosed BLUE proxy card today and return it in
the enclosed postage-prepaid envelope.
Thank you for your support.
Sincerely,
/s/L. Phillip Humann
-----------------
L. Phillip Humann
Chairman, President and
Chief Executive Officer
-------------------------------- IMPORTANT --------------------------------
If you have any questions or need assistance in voting your shares, please
contact the firm assisting us in the solicitation of proxies:
INNISFREE M&A INCORPORATED
TOLL-FREE: 1-877-750-9501
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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).
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