New suitor wins First Security

Only 10 days after Zions Bancorp. shareholders left First Security standing at the altar, Utah's largest bank holding company said Monday it will wed San Francisco-based Wells Fargo & Co. in a $3.2 billion marriage that will go down as the fastest courtship in banking history.

"After careful consideration of our alternatives, we believe it's in the long-term best interests of our employees, customers, communities and stockholders that First Security partner with an outstanding organization whose vision, values and history are very similar to ours," said Spencer F. Eccles, First Security's chairman and chief executive officer.

That Utah's largest banking company would seek to merge with another bank following the failure of its 10-month attempt to merge with Zions was not a surprise, but the speed with which it happened was dizzying, suggesting that the two were holding talks even before Zions' shareholders killed the deal in an emotional meeting on March 31.

Not so, assured Eccles and Wells Fargo president and CEO Dick Kovacevich at a press conference early Monday at First Security's offices. Eccles said he called Kovacevich the day after the Zions vote, and the deal fell together quickly from there.

The new merger calls for Wells Fargo, the nation's seventh largest bank holding company after its own merger 18 months ago with Minneapolis-based Norwest, to buy First Security for $3.2 billion in stock, down from $5.9 billion when the Zions deal was originally announced last June.

Wells Fargo said the deal exceeds its own internal rate of return goals and is expected to add to its earnings per share by the second year of operation. The deal is expected to close in the second half of this year, subject to regulatory and shareholder approvals. Those usually are minor obstacles, but given what happened to the Zions deal, no one is guaranteeing anything.

The terms of the new deal call for Wells Fargo to pay 0.355 share of its shares for each First Security share. The transaction, based on Wells Fargo's closing stock price of $43.69 cents per share on April 3, values each First Security share at $15.50 for a total value of $3.2 billion.

However, that had fallen to $14.11 at the close of trading on Friday based on Wells Fargo's closing price Friday. At that price, it represents a 16 percent premium above First Security's closing price Friday of $12.19. In early trading Monday, Wells Fargo's shares were down 0.63 percent at $39.50. First Security's shares were up 10.26 percent to $13.44, a clear indication that the market thought the deal was good for FSCO, First Security's stock symbol.