Tuesday July 31 12:06 PM ET

First Union Holders Approve Wachovia Deal

CHARLOTTE, N.C. (Reuters) - First Union Corp. shareholders on Tuesday approved a proposed $14.4 billion stock acquisition of Wachovia Corp., the latest chapter in a hotly contested takeover battle with SunTrust Banks Inc. for the Southeastern U.S. bank.

Wachovia shareholders on Friday are set to vote on the First Union merger, which the board of the Winston-Salem company has backed.

At its annual meeting on Tuesday, First Union said stockholders cast about 730.2 million shares -- nearly 75 percent of the 979.2 million outstanding -- in favor of the merger, which would form the nation's fourth-largest banking company.

``We are very pleased to receive this strong support from First Union shareholders,'' First Union Chief Executive Ken Thompson said in a statement. ``We believe the Wachovia/First Union combination -- the new Wachovia -- will create a company that is well positioned for profitable growth.''

First Union announced the merger deal on April 16, offering two of its shares for each share of Wachovia. First Union shareholders would have a 70 percent stake in the combined company.

Atlanta-based SunTrust Banks sued to block the deal, but a North Carolina court rejected the lawsuit. SunTrust in May had launched a hostile bid for Wachovia now valued at about $15.2 billion.

First Union and Wachovia have been urging shareholders to vote for their merger agreement, claiming in proxy materials that the combination would add to earnings next year and would generate a 20 percent return.

The combined company, with 2,887 branches and $187 billion in deposits, would be the largest banking organization operating in its core Southeast market.

Some of the cost savings from the merger would come from branch closings and job cuts. Nearly half of Wachovia's bank branches are within a mile of First Union locations, and the companies
expect to shed about 7,000 jobs over the next three years.

Wachovia and SunTrust held off-and-on merger discussions for several years and had been in talks as recently as December before Wachovia broke off the negotiations.

First Union's stock was up 13 cents at $35.40 in midday New York Stock Exchange trade, while Wachovia rose 19 cents to $70.90 and SunTrust gained 8 cents to $69.22.

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