- The Washington Times - Friday, August 3, 2001

SunTrust's hostile takeover bid of Wachovia Corp. will likely never come to fruition based on the success rate of unfriendly corporate takeovers in the past.
Wachovia shareholders vote today to proceed with a friendly offer from SunTrust's rival First Union.
Since 1988, there have been 1,034 bids targeting prey that weren't willing to consider offers from their hunters. Of those bids, 88 percent have failed, according to New York-based Thomson Financial Securities Data.
"The odds are stacked against [the hostile bidder]," said Richard Peterson, market strategist at Thomson Financial Securities Data. "It's difficult to get the target's board to come along and the shareholders may not be motivated to [support] the hostile bid."
A takeover is when a company buys control of a corporation by purchasing its shares. That can either be a friendly bid or a hostile, unsolicited offer. A hostile takeover aiming to replace the existing management means the target company and the potential buyer did not negotiate a price and the offer is something the target company didn't ask for.
In many instances, the potential buyers are offering stock instead of cash. So the value is different.
Shareholders have to decide "which share of what pie do they want," said Patrick McGurn, vice president at Institutional Shareholder Services, an advisory firm in Rockville.
The hostile takeover tactic has lost its luster over the past decade, partly because so many firms offer stock for their purchase instead of cash.
In 1988 the peak of the unfriendly takeover wars there were 166 hostile takeover bids compared with 57 last year, according to Thomson Financial.
Wachovia of Winston-Salem, N.C., is the latest target among 15 hostile takeover bids that have been issued this year. So far three have been successful, including the acquisition of Einstein/Noah Bagel Corp. by New World Coffee.
But many other businesses have not been so lucky or successful.
Hilton Hotel Corp., after a bitter battle in 1997, gave up on its $10.5 billion unsolicited offer for ITT Corp., which owned and managed the Sheraton hotel chain. ITT instead agreed to a $13.3 bid from Starwood.
The decline in hostile-takeover attempts could be because businesses have learned their lesson based on the unsuccessful rate of completed bids over the past 15 years, Mr. Peterson said.
"Potential acquirers have learned it's better to proceed with a friendly deal," he said.
That's what First Union has done.
The Charlotte, N.C.-based bank has made a friendly $14.5 billion offer for Wachovia while SunTrust has made an unsolicited $15.4 billion offer. Both companies are offering stock to Wachovia shareholders, so shareholders would not actually be getting $1.1 billion less if they chose the First Union deal.
Wachovia shareholders are voting today to proceed with the First Union deal. The deal was approved by First Union shareholders earlier this week and is backed by Wachovia's board.
If Wachovia shareholders vote against the proposed First Union/ Wachovia deal, then the companies are "back to the drawing board," Mr. McGurn said.
Wachovia will have several options including negotiating with SunTrust or renegotiating a better deal with First Union. Or the targeted bank may decide to do nothing, taking itself off the market from any potential bidders, Mr. McGurn said.
The banks aren't going out without a fight.
The advertising frenzy which has included everything from full-page ads and radio commercials to letters and phone calls to shareholders is common in a fight like this.
"Both sides are pulling out all the stops," Mr. McGurn said. "The stakes are high. They're betting their futures on this deal."

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