Exhibit 99(b)
FIRST UNION/WACHOVIA MERGER
Significantly More Compelling Financially to Wachovia Shareholders
Supplementary Information
May 15, 2001
FIRST UNION/WACHOVIA MERGER
Significantly More Compelling Financially to Wachovia Shareholders
"New GAAP" EPS Accretion
o Wachovia shareholders are expected to achieve significant accretion to
"New GAAP" earnings versus significant dilution expected from the
SunTrust proposal.
"New GAAP" EPS Impact to Wachovia Shareholders
First Union/Wachovia SunTrust/Wachovia Advantage from
Merger of Equals* Hostile Proposal** First Union Merger
--------------------- ------------------ ---------------------
2002 9% (9)% 18%
2003 13% (3)% 16%
2004 17% 3% 14%
---
Average 16%
Cash EPS Accretion:
o Wachovia shareholders are expected to receive approximately 20%
accretion to their earnings per share on a cash basis, more than twice
the accretion expected to be achieved from a combination with SunTrust.
Cash EPS Impact to Wachovia Shareholders
First Union/Wachovia SunTrust/Wachovia Advantage from
Merger of Equals* Hostile Proposal** First Union Merger
------------------- --------------------- --------------------
2002 15% 1% 14%
2003 17% 5% 12%
2004 20% 9% 11%
---
Average 12%
Internal Rate of Return (IRR):
o The First Union/Wachovia combination offers substantially greater
returns to current Wachovia shareholders as evidenced by a
significantly higher internal rate of return.
Return on Investment for Wachovia Shareholders
First Union/Wachovia SunTrust/Wachovia Advantage from
Merger of Equals* Hostile Proposal*** First Union Merger
-------------------- ---------------- ------------------
21% 15%-17% 4%-6%
Cost Synergies Available for Wachovia Shareholders:
o The merger with First Union provides Wachovia shareholders an
additional $.15 per share in cost savings which have been endorsed as
reasonable and achievable by analysts and viewed with favor by
investors.
First Union/Wachovia SunTrust/Wachovia Advantage from
Merger of Equals* Hostile Proposal** First Union Merger
--------------------- ----------------- ---------------------
Fully phased in
Efficiencies (pre-tax) $ 890 $ 500 $390
Wachovia ownership of
new company 30% 44%
Wachovia Share of
Efficiencies $ 267 $ 220 $ 47
Earnings per Share
Impact (after tax) $0.83 $0.68 $.15
Restructuring Costs and Deal Related Costs:
o Wachovia shareholders will receive the benefit of First Union's scale
in key business lines and significant overlap in retail markets
resulting in greater cost synergies with proportionately lower upfront
costs.
All data after-tax First Union/Wachovia SunTrust/Wachovia Advantage from
Merger of Equals* Hostile Proposal** First Union Merger
-------------------- ------------------- --------------------
Restructuring Costs $899 $ 620
Option Payment $ 0 $ 780****
------ -------
Total $899 $1,400 $501
Fully Phased In Cost Savings $552 $ 310 $242
Multiple of Cost Savings 1.6 4.5 2.9
Dividend:
o First Union/Wachovia is targeting a dividend payout ratio of 35-40% of
"old GAAP earnings" or 30-35% of cash earnings over the long term.
Given the financial strength of its transaction, the combined First
Union/Wachovia has the capacity to provide identical dividend payments
to Wachovia shareholders, relative to SunTrust's proposal, with a
substantially lower dividend payout ratio. The special dividend of $.48
per share plus the expected payout ratio should fully compensate
Wachovia shareholders for the temporary dividend dilution resulting
from the First Union quarterly dividend.
First Union Proposal SunTrust Proposal
------------------------------------------ ------------------------------------------------
Estimated Present Value Estimated Present Value
Projected Dividend to of Dividend to Projected Dividend to of Dividend to
Cash EPS Wachovia(a) Wachovia(b) Cash EPS Wachovia(c) Wachovia(b)
-------- ----------- ------------ -------- ----------- -----------------
One-time closing dividend $0.48 $0.48 -- --
Q4 2001 $.24 dividend $0.48 $0.48 $0.60 $0.60
2002 $3.28 $2.23 $1.97 $5.35 $2.40 $2.12
2003 $3.67 $2.50 $1.95 $6.06 $2.62 $2.05
2004 $4.11 $2.79 $1.94 $6.82 $2.95 $2.05
----- -----
Cumulative $6.82 Cumulative $6.82
In addition, First Union's projections assume a significantly lower dividend
payout ratio (34%) versus the assumption for SunTrust (40%) giving First Union
the ability to meaningfully enhance its dividend rate or better reinvest excess
capital in high return business lines.
Assumptions in Dividend Analysis
(a) Represents projected cash EPS multiplied by 34% estimated dividend
payout ratio, adjusted by the 2 for 1 exchange ratio offered.
(b) Assumes dividends are present valued based on a 13% discount rate
(c) Represents projected cash EPS multiplied by 40% estimated dividend
payout ratio, adjusted by the 1.081 to 1 exchange ratio offered.
Cumulative Costs and Impact on Capital:
o After-tax restructuring cost, option payment to First Union, and
increased dividend on SunTrust shares equates to over 10+ years of
cumulative projected after-tax cost savings for SunTrust hostile offer.
o After Tax Restructuring Cost $ 650**
o Option Payment $ 780****
-------
subtotal $1,430
o Dividend Increase $2,418 ($186 per year for 13 years)**
------
Total $3,848
o After-tax cost savings over
first 13 years $3,751
* First Union/Wachovia Investor Presentation dated April 16, 2001
** SunTrust Investor Presentation dated May 14, 2001
*** IRR constructed based on data from SunTrust May 14, 2001 Investor
Presentation adjusted to reflect premium to Wachovia shareholders
**** Option payment based on information in First Union S-4 filed April 26,
2001
This supplementary information may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, including,
without limitation, (i) statements about the benefits of the merger between
First Union Corporation and Wachovia Corporation, including future financial and
operating results, cost savings, enhanced revenues, and accretion to reported
earnings that may be realized from the merger; (ii) statements with respect to
First Union's plans, objectives, expectations and intentions and other
statements that are not historical facts; and (iii) other statements identified
by words such as "believes", "expects", "anticipates", "estimates", "intends",
"plans", "targets", "projects" and similar expressions. These statements are
based upon the current beliefs and expectations of First Union's management and
are subject to significant risks and uncertainties. Actual results may differ
from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ
materially from the anticipated results or other expectations expressed in the
forward-looking statements: (1) the risk that the businesses of First Union and
Wachovia will not be integrated successfully or such integration may be more
difficult, time-consuming or costly than expected; (2) expected revenue
synergies and cost savings from the merger may not be fully realized or realized
within the expected time frame; (3) revenues following the merger may be lower
than expected; (4) deposit attrition, operating costs, customer loss and
business disruption following the merger, including, without limitation,
difficulties in maintaining relationships with employees, may be greater than
expected; (5) the ability to obtain governmental approvals of the merger on the
proposed terms and schedule; (6) the failure of First Union's and Wachovia's
stockholders to approve the merger; (7) competitive pressures among depository
and other financial institutions may increase significantly and have an effect
on pricing, spending, third-party relationships and revenues; (8) the strength
of the United States economy in general and the strength of the local economies
in which the combined company will conduct operations may be different than
expected resulting in, among other things, a deterioration in credit quality or
a reduced demand for credit, including the resultant effect on the combined
company's loan portfolio and allowance for loan losses; (9) changes in the U.S.
and foreign legal and regulatory framework; and (10) adverse conditions in the
stock market, the public debt market and other capital markets (including
changes in interest rate conditions) and the impact of such conditions on the
combined company's capital markets and asset management activities. Additional
factors that could cause First Union's results to differ materially from those
described in the forward-looking statements can be found in First Union's
reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K) filed with the Securities and Exchange Commission
and available at the SEC's Internet site (http://www.sec.gov). All subsequent
written and oral forward-looking statements concerning the proposed transaction
or other matters attributable to First Union or any person acting on its behalf
are expressly qualified in their entirety by the cautionary statements above.
First Union does not undertake any obligation to update any forward-looking
statement to reflect circumstances or events that occur after the date the
forward-looking statements are made.
Additional Information
The proposed transaction will be submitted to First Union's and Wachovia's
stockholders for their consideration, and, on April 26, 2001, First Union filed
a registration statement on Form S-4 with the SEC containing a preliminary joint
proxy statement/prospectus of First Union and Wachovia and other relevant
documents concerning the proposed transaction. Stockholders are urged to read
the definitive joint proxy statement/prospectus when it becomes available and
any other relevant documents filed with the SEC, as well as any amendments or
supplements to those documents, because they will contain important information.
You will be able to obtain a free copy of the registration statement and the
joint proxy statement/prospectus, as well as other filings containing
information about First Union and Wachovia, at the SEC's Internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus and the SEC
filings that will be incorporated by reference in the joint proxy
statement/prospectus can also be obtained, without charge, by directing a
request to First Union, Investor Relations, One First Union Center, Charlotte,
North Carolina 28288-0206 (704-374-6782), or to Wachovia, Investor Relations,
100 North Main Street, Winston-Salem, North Carolina 27150 (888-492-6397).
First Union and Wachovia, and their respective directors and executive officers
may be deemed to be participants in the solicitation of proxies from the
stockholders of First Union and Wachovia in connection with the merger.
Information about the directors and executive officers of First Union and their
ownership of First Union common stock is set forth in First Union's proxy
statement on Schedule 14A, as filed with the SEC on March 13, 2001. Information
about the directors and executive officers of Wachovia and their ownership of
Wachovia common stock is set forth in Wachovia's proxy statement on Schedule
14A, as filed with the SEC on March 19, 2001. Additional information regarding
the interests of those participants may be obtained by reading the definitive
joint proxy statement/ prospectus regarding the proposed transaction when it
becomes available.