SALT LAKE CITY (AP) _ Wells Fargo & Co. plans to purchase First Security for $3.2 billion, the companies announced Monday.
The combined bank will be the largest in Utah, Nevada, Idaho and New Mexico, with assets of approximately $241 billion and operations in 23 states.
"The customers and cultures of our two companies are remarkably similar," said Wells Fargo CEO Dick Kovacevich, citing the banks' shared Western heritage. "Both companies compete not just in banking but in the far larger, faster growing industry called financial services."
The merger comes just 10 days after First Security's long-running plans to merge with fellow Utah bank Zions Bancorp. were shot down by Zions shareholders April 3.
On Monday, First Security CEO Spencer Eccles _ who approached Wells Fargo managers April 4 with the deal _ said with barely concealed bitterness that Wells Fargo is now the best option for First Security's shareholders.
"That was then and this is now," he said of the Zions merger. "Certainly this is a different approach, and we will not have the First Security name and the headquarters here."
Utah's largest bank may not have had much choice. First Security stock tumbled sharply from a December high of $31 to $103/4 when it announced that first quarter earnings were expected to drop by 27 percent.
That collapsed the Zions merger, which originally valued First Security stock at $5.9 billion but revised it to about $3.4 billion, prompting financial advisers to declare the plan unfair.
"I think the First Security shareholders understood the position they were put in, which was a very difficult position," said Eric Reim, an analyst with U.S. Bancorp Piper Jaffray, noting that First Security has been counting on a sale for nearly a year.
"If you're pretty much all the way down the aisle and have a big deal fall apart, to not get rehitched is a pretty big risk," he said.
Wells Fargo seems to be getting a better deal. The merger values each Wells Fargo share at $43.6875 and each First Security share at $15.50. First Security stockholders will receive .355 of a share of Wells Fargo stock in exchange for each of their shares.
"It's a very well-priced deal for Wells Fargo," said Denis LaPlante, an analyst with Fox-Pitt, Kelton Inc. "First Security has its problems but I think it's appropriately priced."
The two banks plan to sell off about $1.2 billion worth of deposits and loans to get regulators to approve the deal, which is expected to be complete sometime after June. Wells Fargo also anticipates spending about $375 million on the merger.
Eccles will gain a seat on the Wells Fargo board, and the Eccles family, which founded First Security in Salt Lake City in 1928, will have a hand in running Wells Fargo's Intermountain region operation.
Eccles and Kovacevich also made clear that the banking industry's transition into a broader financial services industry _ and the rapid move toward Internet banking _ helped speed the deal.
"I believe that scale and size and resources and commitment in the Internet, in the high tech area, was very important," Eccles said.
Kovacevich said Wells Fargo has moved quickly to extend Internet banking to its customers, including Minneapolis-based Norwest, which it purchased last year.
In midday trading, First Security was up $1.183/4, or 9.23 percent, at $13.37½. Wells Fargo was down $.75, or 3 percent, at $39.
