October 17, 1995
Mr. William E. B. Siart
Chairman and CEO
First Interstate Bancorp
633 West Fifth Street
Los Angeles, California 90071
Dear Bill:
I appreciate your setting a date for us to continue discussions
while you and your board review your strategic alternatives over the course of
the next year. As I stated during our last meeting, I believe that every day
we delay results in a substantial loss in value for both our shareholders.
Since our last meeting, we have decided to act on this belief.
Therefore, we are submitting for your consideration a tax-free merger proposal
in which each First Interstate Bancorp shareholder would receive 0.625 shares
of Wells Fargo & Co. common stock for each share of First Interstate Bancorp
common stock. This exchange ratio would represent a price of $133.50 for each
First Interstate Bancorp share based on Wells Fargo & Co.'s current market
price, for a total of about $10 billion for your shareholders. (Before the
close of this transaction, Wells Fargo would expect to raise its dividend to
maintain the present dollar level of dividend income per share to your
shareholders.)
As we have discussed, the economic benefit of the proposed merger
is enormous, with between $4 and $5 billion of present value to be shared by
our respective shareholders. Not only will your shareholders gain a
substantial market premium, representing a large share of the present value
generated, but they will also have the opportunity to share in the stock
appreciation of the
Mr. William E. B. Siart
October 17, 1995
Page 2
resulting company which will be the most efficient and dynamic major banking
company in the U.S.
I strongly believe there is no other way to generate this level of
shareholder value. Although we intend to make this proposal public before the
markets open tomorrow, we are not attempting to pre-empt or preclude
negotiations between us. To the contrary, we would welcome the opportunity to
begin a negotiation process immediately. Based on the outcome of these
negotiations, we might be able to increase our offer if you can demonstrate
greater value than is indicated by publicly available data.
The synergies which would result from the combination of First
Interstate and Wells Fargo are substantial. Not only are there significant
cost savings to be derived from a merger, there are also opportunities for
revenue growth through the combination of our mutual reputations for excellent
customer service, technological strengths and innovations in the delivery of
banking services and your broad geographical base. We recognize all that you
and your management team have accomplished, and that the market has rewarded
your performance. However, it is time now to consider the sources of future
value creation for your shareholders (as we are doing for ours). We believe
that far greater rewards would be available if we combined the strengths and
values of our two companies.
The combination of two large banking institutions will,
inevitably, lead to some job losses and elimination of redundant branches or
facilities in both our organizations, as has been the case in all bank
consolidations. In this instance, we believe such measures would be justified
by the creation of a more competitive California-based institution that can
best serve the needs of its customers and communities. We are committed to the
fair treatment of employees whose jobs may be lost as a result of this
transition. As each of us has done in past mergers, we would expect to freeze
hiring at the combined organization, and to fill from
Mr. William E. B. Siart
October 17, 1995
Page 3
within whatever vacancies are created by normal attri-
tion.
Each of our organizations has a strong record of commitment to our
respective communities. The combined organization will be even better
positioned to continue that performance. In particular, we are convinced that
the State of California, our headquarter cities and other California
communities will benefit from retaining in California the headquarters of what
will be one of the country's ten largest banks. If our banks instead merge
with or are acquired by large out-of-state banks, the State's economic and
social fabric will be diminished.
We have the highest regard for your board, and we trust that this
respect is reciprocal. In order to take full advantage of the significant
resource represented by the members of your boards, as well as to provide
added assurances to your employees, customers and communities, we propose that
the board of the combined company be comprised of existing directors of both
companies, many of whom are already well-acquainted. We also propose
maintaining headquarters locations in both the north and the south.
Our merger proposal is subject to the execution and approval of a
mutually acceptable definitive agreement by our respective boards, and we
anticipate no difficulty in quickly reaching full agreement. I have received
approval from our board for this proposal, and they are unanimous in their
enthusiasm for the merger.
We anticipate no difficulty in obtaining all regulatory approvals
on a timely basis. In fact, we expect that the regulators will be totally
supportive, as we have an outstanding CRA rating and are very well
capitalized. Our review of competitive considerations demonstrates that the
relevant issues can be readily resolved.
In closing, I want to assure you that my enthusiasm for the
proposal is shared by my entire board, and
Mr. William E. B. Siart
October 17, 1995
Page 4
they join me in emphasizing how much we want to work together with your team
to forge what would truly be the premier banking organization in the country.
We have an extraordinary opportunity to create value for shareholders and
benefits for our other constituencies, and we should not let it pass. I hope
that we can begin negotiations to address any issues that may concern you and
your board.
Sincerely,
/s/ Paul Hazen
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Paul Hazen
Chairman and CEO