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For week ended April 02, 2000 Posted 24 Feb 2001
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Sent on Mormon-News: 04Apr00

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 particularly vulnerable.

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


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