CHARLOTTE, N.C. — First Union Corp., the nation's sixth-largest bank, is buying Wachovia Corp. for about $13.4 billion in stock in a deal that would unite the two North Carolina banking rivals into the nation's fourth-biggest banking company.
The deal announced Monday would create a bank with $324 billion in assets, trailing only Citigroup Inc., Bank of America Corp. and J.P. Morgan & Chase Co. among U.S. banks.
About 7,000 jobs will be cut over the next three years as part of the deal, the banks said, roughly half of them through attrition. That represents about 7.8 percent of its combined 90,296 employees.
The combined entity, which will be called Wachovia Corp., will have 19 million customers, 90,000 employees, 2,900 banking branches and nearly 600 brokerage offices.
Both boards have approved the transaction.
First Union is offering two of its shares for each share of Wachovia, which would value Wachovia at about $63.84 a share — a premium of only 6 percent over Thursday's closing price of $60.20.
In morning trading Monday on the New York Stock Exchange, shares of Wachovia rose $1 at $61.20, while shares of First Union fell $1.53 to $30.39.
Wachovia shareholders will own about 27 percent of the combined company and will get a special one-time dividend of about 48 cents a share because First Union recently slashed its dividend.
Meanwhile, First Union said Monday its first-quarter earnings fell to $584 million, or 59 cents a share, from $840 million, or 85 cents a share. Its operating earnings dropped to $610 million, or 62 cents per share, from $838 million, or 85 cents a share. The decline reflected a drop in principal investing revenues, the winding down of divested businesses and a difficult financial market environment, the bank said.
The first-quarter operating earnings matched expectations from Thomson Financial/First Call.
First Union has about 2,100 bank branches in 11 eastern states and Washington, D.C., while Wachovia has more than 650 offices, primarily in Florida, Georgia, North Carolina, South Carolina and Virginia.
The two banks are structuring the deal similar to a merger of equals, a rare step given that the framework is usually used when two companies are similar in size and market capitalization. In this case, First Union with $253 billion in assets dwarfs Wachovia, which has only $74 billion in assets.
L.M. "Bud" Baker Jr., Wachovia's chairman and chief executive, will be chairman of the combined company, which will be based in First Union's hometown of Charlotte. Currently, Wachovia has dual headquarters in Winston Salem, N.C., and Atlanta.
Meanwhile, First Union's chief, G. Kennedy Thompson, will be president and CEO of the combined entity. Each side would get nine board seats.
"Wachovia and First Union have a common vision, common values, common markets — and now a common name," Thompson said.
The deal comes only days after Bank One Corp. agreed to purchase Wachovia's $8 billion consumer credit card portfolio for undisclosed terms.