Filed by First Union Corporation
Pursuant to Rule 425 under the Securities
Act of 1933 and deemed filed pursuant to
Rule 14a-12 under the Securities Exchange
Act of 1934
Subject Company: Wachovia Corporation
Commission File No. 333-59616
Date: May 29, 2001
This filing contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such statements include,
but are not limited to, (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 and Wachovia'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
and Wachovia'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 and
Wachovia's results to differ materially from those described in the
forward-looking statements can be found in First Union's and Wachovia'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 Wachovia or any person acting on
their behalf are expressly qualified in their entirety by the cautionary
statements above. First Union and Wachovia do 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.
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.
THE FOLLOWING PRESENTATION MATERIALS MAY BE USED BY FIRST UNION FROM TIME TO
TIME IN ANALYST AND INVESTOR MEETINGS
[WACHOVIA LOGO] [FIRST UNION LOGO]
Wachovia/First Union
Merger Transition Process
May 2001
Cautionary Statement
--------------------------------------------------------------------------------
This presentation 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 and Wachovia'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 and Wachovia'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 and Wachovia's results to differ
materially from those described in the forward-looking statements can be found
in First Union's and Wachovia'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 Wachovia or any person acting on their behalf are expressly qualified in
their entirety by the cautionary statements above. First Union and Wachovia do
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.
Page 2
Wachovia/First Union
Key Merger Integration Objectives
--------------------------------------------------------------------------------
Primary Objectives
o Lose no customers
o Stay focused on customer experience
o Improve customer perception of combined organization
Other Objectives
o Provide a distinctive value proposition for customers which is based on
maintaining a high level of trust and respect among employees
o Convert systems on time with no adverse customer service/sales impact
o Exceed quarterly earnings targets
o Exceed pro forma efficiency expectations
o Simplify the complexity of the combined operating environment
A Key to Transition Success
o Successfully running normal day-to-day business activities
Page 3
Merger Transition Organization
Balanced Representation of Wachovia and First Union Management
Executive Committee (B. Baker and K. Thompson)
Approve key transition decisions
Merger Steering Committee (B. McCoy and D. Carroll)
Set overall policies
Project Management Office
Coordinate and oversee all transition processes and communications
Customer Experience Team Integrated Communications
Culture Integration Team Progress Tracking
Transition Team Conversion Task Force
Manage the corporations' integration Complete all systems conversions
at the business unit level
All Business Units Represented
All Business Units Represented
Page 4
Team Roles
--------------------------------------------------------------------------------
Executive Committee
o Approve Key Merger Steering Committee decisions
Merger Steering Committee
o Establish strategic direction
o Provide overall leadership
o Approve recommendations
o Address issues and resolve conflicts
Project Management Committee
o Coordinate teams sequence activities and monitor progress
o Develop merger timeline and set milestones
o Identify and allocate critical resources
o Resolve issues
Page 5
Team Roles
--------------------------------------------------------------------------------
Customer Experience Team
o Monitor primary emphasis on customer retention through transition
o Immediately respond to any integration-related customer issue
o Provide customer perception and issue identification information
associated with merger
Culture Integration Team
o Assess cultural similarities and differences
o Provide action-oriented programs to accelerate cultural integration and
leverage cultural differences
Integrated Communications
o Review and approve all internal and external communications
o Ensure accuracy and consistency with merger objectives and guiding
principles
Progress Tracking
o Develop and track key metrics related to merger transition information
Page 6
Team Roles
--------------------------------------------------------------------------------
Transition Team
o Develop combined business unit strategies, plans and organizational
structures
o Integrate business units to establish merged entity
o Assess business readiness for integration
o Manage execution risk
Conversion Task Force
o Conduct technical systems review, analysis and selection
o Develop conversion schedule based on business unit strategies
o Implement project plan for systems integration
Page 7
Transition Due Diligence
--------------------------------------------------------------------------------
Original Due Diligence
o Black hole analysis
o Validate efficiencies
o Initial identification of transition issues
Key Foundation Strategies Established by June 30
o New business strategies established
o New organization designed
o Tier I, II, III management identified
Subsequent Due Diligence Completed by July 31
o Re-calculate efficiencies at detail level under new business model
o Re-calculate all restructuring/merger-related one-time expenses
o Incorporate results in operating budgets
Page 8
Timeline
--------------------------------------------------------------------------------
2001 2002 2003
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Transition Organization In Place X
Merger Agreement Announced X
Strategic Business Reviews X X
Management Structure
Executive X
Tier 2 Senior Management X
Tier 3 Management X
Shareholder Meeting X
Consummation X
Divestiture Purchase Agreements X
Divestitures Complete X X X
System Review and Selection X X X
Early Conversions (e.g. GL, HR, AP) X X X X
Training Calendar Developed X X X X X
Core Conversions X X X X X
*Detailed conversion schedule in Appendix
Page 9
Transition Risk Management
--------------------------------------------------------------------------------
o Risk management is key component of entire transition/ execution
process
- Customer risk - Employee risk - Market risk
- Systems/operations risk - Regulatory risk - Capacity/volume risk
- Organization risk - Financial risk - Transaction risk
o Continuous assessment of transition/conversion readiness
o Proactive risk management through early warning
o Key risk identification process for elevating issues to executive
management
o Merger transition organization structure provides the governance
backbone for all risk management
Page 10
Merger Experience
--------------------------------------------------------------------------------
o 81 bank mergers since 1985 with virtually no negative impact
- 27 mergers were greater than $1 billion in assets
- 13 mergers were greater than $5 billion
- 10 broker dealers/investment managers with greater than 3 million
customers
o Ability to serve all retail customers anywhere throughout franchise
o Converted over 2,000 systems and 4,000 branches to common platforms
while updating every major platform to state-of-the-art technology
o All mergers done without negative impact on customers except for
CoreStates
- Extracted too much cost
- Converted too fast
- Implemented new business model simultaneously
- Does not characterize our approach to doing mergers and acquisitions
Page 11
Conversion Experience (1985 - 2001)
--------------------------------------------------------------------------------
Goal: To have common systems and integrated environment
81 Acquisitions Involved
------------------------
General Ledger
Payroll
Accounts Payable
Fixed Assets
Benefits
Network Connectivity
Customer
Information Systems
41 of Those 81
Less Complex
Bank Acquisitions
Additionally
Involved
------------------------
Deposits ATM
Consumer Loans
Leasing
Indirect
Unsecured/Secured
Commercial Loans
CDs
Safe Deposit Box
Overdraft Protection
Mortgage
Item Processing
Credit Card
Wire Transfer
Equity Lines
ACH
30 of Those 81
Complex Bank
Acquisitions
Additionally
Involved
------------------------
Mutual Funds
Brokerage
Personal Trust
Corporate trust
Insurance
IRA
CAP
International
Sales Tracking
CheckCard/Debit Card
Capital Markets Investments
Capital Management Investments
Trading
Account recovery
Cash management
401K
Institutional Custody
10 Specialty
Acquisitions
Involved
------------------------
Unique System Conversions
Examples Include:
Equity Derivative Systems
Bond Systems
Insurance Systems
Dot Coms
Page 12
Progress Tracking Dashboard
--------------------------------------------------------------------------------
o Continuous tracking of transition progress for early detection of
issues
o Dashboard of key performance metrics provided by Project Management
Office to Merger Steering Committee and selected external audiences
o Information tracked
Financial
---------
Core Expense/Goal
One Time Expense/Goal
Operating Exp/Operating Rev. vs. Goal
Operating EPS/Forecast vs. Goal
Cash EPS/Forecast vs. Goal
ChargeOffs/Avg. Loans vs. Target
NP/Loans +OREO vs. Target
Avg. Deposits/Customer vs. Baseline
Avg. Loans/Customer vs. Baseline
Revenue Growth/Forecast
Tier 1 Capital vs. Target
Total Capital vs. Target
Debt Rating vs. Target
Reserves/Loans vs. Target
Credit Losses/Avg. Loans vs. Target
Noncredit Losses/Avg. Loans vs. Target
Share Price Movement/BK Index vs. target
Economic Profit Growth vs. Target
Operating ROE vs. Target
Share Repurchases vs. Target
Page 13
Progress Tracking Dashboard
--------------------------------------------------------------------------------
Customer
--------
Attrition vs. Baseline
Consumer
Small Business
At Risk Assessment vs. Target
Consumer (Gallup) vs. Target
Commercial (Barlow) vs. Target
Market Share of Target Groups vs. Target
Growth vs. Baseline
Brand Perception vs. Target
Customer Perception vs. Target
Human Resources
---------------
Cultural Task Force Meeting Milestones
FTE Reduction/Plan
Training Events/Plan
% Employees Retained/Plan
% Displaced in New Positions/Plan
Monthly Turnover/Plan
Transition Plan Milestones
--------------------------
% Milestones Completed vs. Schedule
Call Center Service Level Metrics vs. Target
Uptime vs. Target
Data Accuracy vs. Target
Data Integrity vs. Target
Level of Exceptions vs. Target
Page 14
Appendix
Merger Key Events Timeline
DRAFT -- MOE Target Dates
Day: 1 5 10 15 30 50 60 90 120 150 180 365 850
Merger Agreement Announced X
Merger Steering Committee Formed X
Merger Steering Committee
Begins Meeting X
Transition Team Leaders Identified X
Welcome/Comfort Sessions-All Divisions X
Organizational Charts
(Senior Management) X
Transition Team Leaders Meeting X
Conversion Task Force Identified X
File OCC Application X
File Fed Application X
File Preliminary Proxy Statement
with SEC X
File S-4 with SEC X
Mail Proxy Statements X
Conversion Task Force Meetings Begin X
Publish Conversion Schedule
(High Level Strawman) X X
Systems Review & Systems Selection X X X
Product Alignment Begins X X X X X
Selection Process for
Personnel/HR Determined X X
Key Leadership Positions
Determined & Communicated X X
Shareholder Meeting X X
Business Plans for All Divisions X
Telecommunications/Corporate
Real Estate Site Visits Begin X
Business Unit Contingency Plans X X
Training Calendar Developed X X
Branch Consolidation/Facility
Designs X
Early Conversions
(GL, AP, PW, FA, HR, etc) X X X
Merger Consummation X X
Flex Benefit Orientation Begins X
Divestiture X
Final Conversions (Deposits, etc) X X
Signage Changed at All Branches X X
Page 16
INTEGRATION DASHBOARD
Wachovia / First Union
----
Date
----
Financial
--------------------
DEAL EXECUTION
--------------------------------------------------
Actual TTD Goal
--------------------
Core Expense
/Goal
--------------------------------------------------
TTD Total
--------------------
OneTime
Expense/Goal
--------------------------------------------------
Actual TTD Goal
--------------------
Operating Exp./
Operating Rev.
--------------------------------------------------
--------------------
DELIVERING
EARNINGS
TARGET
--------------------
Actual TTD Goal
--------------------------------------------------
Operating EPS/
Forecast
Cash EPS/
Forcast
--------------------------------------------------
--------------------
CREDIT QUALITY
--------------------
Actual Target
--------------------------------------------------
ChargeOffs/
Avg. Loans
NPA/Loans
+ OREO
--------------------------------------------------
--------------------
REVENUE
MOMENTUM
--------------------
Revenue/Growth Linked Qtr.
Goal Actual Forecast
--------------------
Wealth Management
Specialty Finance
General Banking
Capital Management
Capital Markets
Total
--------------------------------------------------
--------------------
SOUNDNESS
--------------------
Actual Target
Reserves/Loans
Credit Losses
Non-Credit Losses
Tier 1 Capital
Total Capital
Debt Rating
----------------------------------------------------
--------------------
SHAREHOLDER
VALUE
--------------------
Actual Target
Share Price Movement/Index
Economic Profit Growth
ROE
------------------------------------------------------
NOTES: TTD = Transition to Date ( ) Indicates problem area
INTEGRATION DASHBOARD
Wachovia / First Union
----
Date
----
Customer
---------------------------------------
ATTRITION
---------------------------------------
Actual Baseline
-----------------------------------------------------------------------
Attrition vs.
Baseline
Small Business
Consumer
At Risk Assessment
-----------------------------------------------------------------------
---------------------------------------
SERVICE QUALITY
---------------------------------------
Actual Goal
-----------------------------------------------------------------------
Consumer (Gallup)
Commercial (Barlow)
-----------------------------------------------------------------------
---------------------------------------
MARKET SHARE
---------------------------------------
Actual Goal
-----------------------------------------------------------------------
Market Share of
Target Groups
-----------------------------------------------------------------------
---------------------------------------
ACQUISITION
---------------------------------------
Actual Baseline
-----------------------------------------------------------------------
Growth vs. Baseline
-----------------------------------------------------------------------
---------------------------------------
IMAGE
---------------------------------------
Actual Goal
-----------------------------------------------------------------------
Brand
Perception
Customer
Perception of
Merger
-----------------------------------------------------------------------
---------------------------------------
BRANCH IMPACT
---------------------------------------
Actual Baseline
-----------------------------------------------------------------------
Avg. Deposits/Customer
Avg. Loans/Customer
-----------------------------------------------------------------------
INTEGRATION DASHBOARD
Wachovia / First Union
----
Date
----
Transition Milestones
---------------------------------------
MEETING MILESTONES
---------------------------------------
Actual Schedule
-----------------------------------------------------------------------
% Milestones Complete
-----------------------------------------------------------------------
---------------------------------------
SERVICE LEVEL EXECUTION
---------------------------------------
Actual Goal
-----------------------------------------------------------------------
Call Center/Service Level
Metrics
-----------------------------------------------------------------------
---------------------------------------
CORE SYSTEMS ENHANCEMENT
---------------------------------------
Actual Goal
-----------------------------------------------------------------------
Uptime
Data Accuracy
Data Integrity
-----------------------------------------------------------------------
---------------------------------------
OPERATIONAL RISK MANAGEMENT
---------------------------------------
Actual Goal
-----------------------------------------------------------------------
Level of Exceptions
-----------------------------------------------------------------------
INTEGRATION DASHBOARD
Wachovia / First Union
----
Date
----
Human Resources
---------------------------------------
CULTURAL ALIGNMENT
---------------------------------------
Actual Schedule
-----------------------------------------------------------------------
Cultural Task
Force
Meeting
Milestones
-----------------------------------------------------------------------
---------------------------------------
STAFFING TO PLAN
---------------------------------------
Actual Goal
-----------------------------------------------------------------------
FTE Reduction/Plan
-----------------------------------------------------------------------
---------------------------------------
SATISFACTION
---------------------------------------
Actual Goal
-----------------------------------------------------------------------
Employee
Interview
Voluntary
Controllable
Turnover
-----------------------------------------------------------------------
---------------------------------------
KNOWLEDGE/SKILL LEVELS
---------------------------------------
Actual Goal
-----------------------------------------------------------------------
Training
Events/Plan TBD TBD
-----------------------------------------------------------------------
---------------------------------------
RETENTION OF KEY EMPLOYEES
---------------------------------------
Actual Goal
-----------------------------------------------------------------------
% Retained
% Displaced in
New Positions
Monthly
Turnover
-----------------------------------------------------------------------
INTEGRATION DASHBOARD
Wachovia / First Union
----
Date
----
APPENDIX
Detail to be determined - support for calculations