Summarized by Kent Larsen
Proposed Merger of Mormon Banks Dies
Salt Lake Tribune 1Apr00 B4
By Lesley Mitchell and Steven Oberbeck: Salt Lake Tribune
SALT LAKE CITY, UTAH -- The proposed merger of Zions Bancorporation
and First Security Corp. finally died on Friday when Zions
shareholders rejected the proposed merger. Only one-third of the
shareholders approved the deal, which had been approved by First
Security shareholders earlier in the month.
The was the victim of changing value of the stock of the two banks.
Since the deal was proposed, the value of the merger has dropped from
$5.9 billion to $3.9 billion, and the relative value of the two
stocks shifted, making the value of a share of stock given up worth
more than the value of the resulting stock in the combined company.
Contributing to the shift in value was First Security's report
earlier this year that its earnings for the first three months of
this year would be 27% lower than expected.
Following the announcement, Zions Bancorporation consulted with its
financial advisor, Goldman Sachs &Co., which then reported that the
combination was no longer in favor of Zions stockholders. The
stockholders agreed on Friday, voting down the proposed merger.
First Security expressed disappointment at the failure, and analysts
wondered if the deal might be put together again, at different
relative values, "The one question that remains is, can they salvage
the deal," said analyst Joe Morford of Dain Rauscher Wessels in San
Francisco. "It seems like they have gone so far down the road they
cannot afford not to renegotiate." Erick Reim, banking-industry
analyst for U.S. Bancorp Piper Jaffray in Minneapolis says, "If they
are going to [renegotiate terms], it will happen very quickly, within
the next 30 days."
But both banks claimed on Saturday that they are no longer pursuing
the deal. Analyst Morford speculates that First Security has already
been approached by other banks seeking to purchase it. The failure of
the merger leaves both banks weaker, and First Security is
Zions is also a big looser in the deal, with losses on stock of First
Security that it held of about $100 million. Both companies have
already taken steps to combine their businesses, moves which will
mean another $25 million in costs to Zions.
The Salt Lake Tribune reviewed the history of the two banks in its
article Sunday. Both banks were founded by Mormon pioneers, Zions by
Brigham Young, as a bank for the LDS Church. The Church sold Zions to
Ray Simmons, father of current Zions CEO Harris Simmons, in 1960.
Harris, who is an LDS Church member, has in recent years become
something of a darling to Wall Street, which has loved the bank's
strong financial performance, which far exceeds the lackluster
performance of First Security. Since Harris Simmons became CEO in
1990, the banks assets have soared from less than $4 billion to $19
billion. While this is still less than First Security, the bank's
performance led Wall Street to peg its market value $1.2 billion
higher than First Security.
But First Security has been larger for a long time. It was founded by
Mormon pioneer David Eccles, a Scottish convert to the LDS Church who
became one of the great entrepreneurs of the West. The bank was built
up by his son, Marriner Eccles, who went on to build it into the
first multi-bank holding company in the U.S. Marriner Eccles later
served as the first chairman of the Federal Reserve, the position now
occupied by Alan Greenspan. The Eccles family has been a big part of
Utah history and philanthropy, establishing seven foundations, with
combined assets exceeding $1 billion.
The Tribune attributes some of the failure of the deal to the pride
of Spencer Eccles, current CEO of First Security. According to the
Tribune, Eccles insisted that the merger be a merger of equals, in
spite of Wall Street's valuation of Zions as worth $1.2 billion more
than First Security. Because of this insistence, Eccles refused to
renegotiate the terms of the merger agreement following First
Security's report of lower earnings and the resulting decrease in its
stock price. BYU professor of finance Steven Thorley suggests that
the rejection of the merger doesn't necessarily mean that Wall Street
is opposed to the merger, He says that the two banks should have
merely renegotiated the price of the deal.
And not everyone has given up on the merger. LDS billionaire Jon M.
Huntsman hopes that the deal can still emerge from the events, "This
deal was a dream come true for both Zions and First Security. It
brings together two old-line banks with close personal relationships
in the community. And both recognized it is important for our
community to have roots and a sense of history."
Utah's big bank wedding is off
Deseret News 2Apr00 B4
By Dennis Romboy: Deseret News staff writer
First Security, Zions won't join
Merger's Collapse Leaves Both Banks Weaker
Salt Lake Tribune 2Apr00 B4
By Guy Boulton