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Verdict allows vote on merger
But court hands partial victory to group suing to block bank deal

Editor's note: The results of today's vote will be posted as soon as the information is available: http://deseretnews.com/dn/biz/0,1554,5,00.htmlAs the clock ticked down today toward the seemingly final act in the Zions Bancorp./First Security Corp. merger melodrama, the U.S. 10th Circuit Court of Appeals in Denver gave a coalition of Utahns who have been trying to stop the deal a partial victory.

The court denied a motion filed jointly by Zions and First Security to dismiss the antitrust-based appeal of the coalition. The group filed the appeal in December after the Federal Reserve Board authorized the deal, which called for First Security shareholders to receive 0.442 of a share of the new company while Zions shareholders would get a full share for each of theirs.

But it was a Solomonic victory for the coalition and its Provo attorney, George M. Allen, as the appeals court also denied their motions to send the deal back to the Fed for reconsideration and to delay the merger pending expedited consideration of the appeal.

The decision, rendered Tuesday but not received in Provo until late Thursday, meant the meeting of shareholders scheduled for 1 p.m. today at the Doubletree Hotel downtown could go forward as planned.

Allen said the court's decision means that even if the merger is approved by Zions shareholders, it would still be subject to antitrust challenges in both the federal court in Salt Lake City and the appeals court in Denver.

Allen said he took the position in both courts that it would be better to delay the merger while litigating the antitrust issues, but the court ruling means it agreed with the Fed's lawyers that the merger should be allowed to go forward "but be subject to possible unwinding or further divestitures of additional branches" if the lawsuit eventually prevails.

Which would all be rendered moot if Zions shareholders decide to kill the deal this afternoon. Allen would not speculate early today on how he thought the voting would go, but he pointed out that Zions filed a Form 8-K disclosure with the Securities and Exchange Commission on Thursday that once again highlighted that its adviser, Goldman Sachs & Co., says the deal, as currently structured, is no longer fair to Zions' shareholders.

Allen vowed to pursue the case if the merger is completed as it now stands or if the terms of the deal are renegotiated. "The antitrust cases won't be moot until they announce the deal is dead." If they do, "the litigation will be over, but not until then," he said.

Similarly this week, U.S. Magistrate Richard L. Puglisi of the federal court in New Mexico issued his written rulings and recommendations on the merger, giving partial victories to both sides. Puglisi, who heard the case earlier this month after Utah's federal judges excused themselves from it, dismissed four plaintiffs in the antitrust suit from the case, saying they lacked standing because they were not Zions or First Security customers at the time of the filing and thus could not show an antitrust injury.

They were Connie Brown, David R. Jorgensen (doing business as Provo Diesel Service,) Knimer Corp., Irontown Housing and Valgardson Transport Co. But plaintiffs Charles Noyes and Joseph Stumph were found to have standing and remain as plaintiffs in the case.

Puglisi ruled against Zions' motion to dismiss on the basis that the court lacks jurisdiction and also ruled against the plaintiffs' motion for summary judgment

Unlike First Security shareholders who, as expected, voted in favor of the merger at their meeting on March 22, the vote by Zions' shareholders was viewed as a toss-up early today. Some industry watchers argued that Zions stockholders would approve the deal because it would be too expensive to unravel. Others said there was no way it could happen now.

The "pro" contingent says Zions and First Security are already so entwined -- work on combining certain departments has apparently been going on since last summer -- that the costs of cutting bait now would be prohibitive.

The "anti" segment argues that there is no way Zions shareholders would vote for the deal since Goldman Sachs withdrew its "fairness" opinion.

Also, Zions sent out new proxy materials that no longer recommend the deal and new voting cards allowing those who had previously said "Aye" to change their vote to "Nay."

One way or the other, the issue was expected to be settled this afternoon.