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Summarized by Kent Larsen
Will Zions-First Security Merger Fall Apart?
Deseret News 14Mar00 B4
By Max Knudson: Deseret News business editor
SALT LAKE CITY, UTAH -- In the wake of a poor earnings report from
First Security Corp. and the subsequent stock drop, Goldman Sachs
Group, Inc. announced Monday that investors could no longer rely on
its February 17th opinion that the merger is a good deal for Zion's
shareholders. The announcement puts the merger in doubt and may
require that it be reconfigured if not cancelled.
"I think the merger at its current terms is unlikely to go through at
this point," said Edward Jones investment analyst Chris Blum. "Prior
to today, Zions was set to marry First Security, but the bride is now
less attractive than before, and Zions may be looking for a larger
dowry before going ahead with the marriage." Dain Rauscher Wessels
analyst Joe Morford in San Francisco agrees, "It's certainly added
more uncertainty to an already cloudy picture. It's hard to see the
deal getting done if the investment bankers don't support it, but it
will still come down to the vote." Shareholders are scheduled to vote
on the merger March 31st, in the final step necessary for the deal to
go through.
The current deal offers Zion's shareholders about 2 1/4 shares of
First Security stock for each Zions share. But since the deal was
announced, the value of the deal to Zion's shareholders has dropped
more than 40%, requiring a change in the number of shares Zion's
shareholders get for the deal to stay similar.
First Security says that nothing has changed and that the merger
should go through as planned. "We believe Zions is obligated to honor
its commitments under our merger agreement and take all appropriate
steps to consummate the transaction," said First Security CEO Spencer
F. Eccles. But Zions Bancorporation CEO Harris Simmons says he is
disappointed with any suggestion that Zion's isn't living up to the
deal, "Zions Bancorporation is disappointed by, and flatly denies
allegations . . . suggesting that Zions has breached its agreement
with First Security. Zions' board of directors has not withdrawn or
qualified its recommendation of this transaction to its shareholders."
Analysts suggest that Eccles is upset with Zions lack of recent
support for the deal, "First Security is upset because Zions is not
out there actively supporting the merger," said Steven Hanson, an
analyst with Merger Insight in New York City. "Zions is not really
saying anything at all and that scares people." But the current
configuration puts Zions in a difficult position, because investors
may sue if the deal turns out to be bad. "Zions is doing everything
it can right now to avoid being sued by everybody," said analyst
Erick Reim of U.S. Bancorp Piper Jaffray. "Odds are [Zions] is going
to be sued by somebody."
See also:
Zions Boss Denies Backing Off Deal
Salt Lake Tribune 16Mar00 B4
By Lesley Mitchell: Salt Lake Tribune
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