Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 28, 1993 TAG: 9303290404
SECTION: EDITORIAL PAGE: B-3 EDITION: METRO
SOURCE: WARNER DALHOUSE
DATELINE: LENGTH: Long
But the merger between Dominion Bankshares and First Union Corp. is the most interesting and important local business event since the Norfolk & Western Railway merged with the Southern and moved the headquarters to Norfolk.
It is a shame that some of our media representatives have tended to be so shrill, if not a little hysterical, usually emphasizing the negative aspects of the merger and often reporting rumors and even rumors of rumors - rather than hard facts as they really develop.
It's a shame because both the N&W merger and the Dominion sale to First Union include some very positive results and promise for the future.
The merger of the N&W with the Southern Railway was a result of strong momentum in that industry toward consolidation, elimination of excess capacity, and improvement in efficiencies and productivity.
It was an action taken by the board of the N&W for the benefit of the shareholders - even though the N&W's chief executive officer at that time was a Roanoke Valley native. The impact on the community was significant - though not nearly as terrible as predicted by many, including the media.
The railroad said, repeatedly, that it would always be a significant corporate citizen in the Roanoke Valley. N&W officials reminded us that Roanoke had the largest railroad-employment base of any community in their entire system, and would almost assuredly continue that position because of our location and the large infrastructure already here.
The railroad had earned the reputation as a generous and deeply involved corporate citizen - and certainly deserved our trust as a corporation doing what had to be done for the stockholders and taking community impact into account as much as possible.
I maintain to you that very similar situations were at work in the Dominion-First Union merger.
There is, and has been for years, a strong momentum in the banking industry toward consolidation, elimination of excess capacity and improvement in efficiencies and productivity. Dominion itself had completed 57 mergers since 1961, and that process continues all over the country.
Our sale to First Union was an action taken by the Dominion board for the benefit of the shareholders - even though Dominion's chief executive officer at that time was a Roanoke Valley native. The impact on the community has been significant - though not nearly as terrible as many have predicted or reported.
Dominion and First Union have said, repeatedly, that this bank will always be a significant corporate citizen in the Roanoke Valley. We have reminded the community that we will be the headquarters for a rapidly growing Virginia, Maryland and District of Columbia bank because we have extensive facilities and excellent productivity here.
I believe we, too, have earned the reputation as a generous and deeply involved corporate citizen - and deserve the trust of the community as a corporation doing what had to be done for the stockholders, while taking community impact into account as much as possible.
The N&W and Dominion boards each had a fiduciary responsibility - read that as legal responsibility to do the right thing for the stockholders - regardless of how that action might affect this one community in the four-state area we served.
We did that and at the same time, without diluting in any way our care for the stockholders, put together a deal that already begins to look very, very good for the Roanoke Valley.
As John Georgius, president of First Union Corporation, said last September when the merger was announced, "We are not buying Dominion to make it smaller. We are buying Dominion to make it larger and more profitable."
Since the N&W merger - and the cries of doom and gloom about that - here are some of the positive things that have happened:
Roanoke still has the largest concentration of employment on the N&W system. To be sure, downsizing has continued - but it has continued through the entire railroad industry and in all other communities served by the railroad as well.
Hotel Roanoke was given by the railroad to Virginia Tech after the merger - one of the few ways the hotel could possibly survive.
A brand-new 11-story NS office building was erected near the City Market area - hardly an act of a corporation abandoning a community.
Contributions to local philanthropies have continued. In fact, the $2 million gift to the Renew Roanoke Foundation for the Hotel Roanoke Conference Center project is the largest contribution ever made by the railroad in its history.
Parallels can be drawn with our merger as well.
Since the Dominion merger and the cries of doom and gloom, here are some of the positive things that have happened:
Roanoke is still the headquarters of a three-state banking operation with the largest concentration of employment anywhere in that system. To be sure, downsizing has continued, but it has continued throughout the banking industry and in all communities served by First Union of Virginia, Maryland and the district. But making Roanoke the headquarters for the Virginia bank was an early understanding between me and First Union Chairman Ed Crutchfield.
As predicted last September, we were the successful bidder for the $4.5 billion First American Bank in the Washington area, so that our total assets when that purchase is completed in June will be $12.2 billion, almost $3 billion larger than we were last September - and almost $2 billion larger than we were when our $1.8 billion Tennessee franchise was part of our totals.
Over 400 new jobs are being moved to the Roanoke Valley by First Union from Charlotte. Three hundred of those jobs will be in downtown, supporting the central city's vitality and all the downtown merchants. That was a conscious decision by First Union, before we knew of the First American acquisition. In fact, Roanoke's operations center will be a third larger than any other similar operation in the entire First Union system.
There are excellent prospects for growth, not only as a result of First American but also because the new consumer-credit credit-card customer-service centers are for the entire First Union system over seven states and the District of Columbia. The designation of Roanoke for all new mortgage-servicing promises, I believe, very steady growth in jobs for a very long time.
I predict national interstate banking will be approved during this new administration in Washington. First Union is already the seventh-largest banking company in the nation. It stands to reason it will continue to grow and add jobs far beyond anything Dominion would have been able to do.
Our local philanthropies have continued for commitments we had already made, and will commence with new ones after we return to acceptable levels of profitability - much sooner than Dominion could alone.
First Union committed $300,000 to the Hotel Roanoke project, the largest gift of any financial institution - and topped only by Carilion and Norfolk Southern. We are also the largest lender for the project, another action taken since the merger was announced.
Incidentally, I made the recommendation for that gift to the hotel by interoffice mail to Charlotte one afternoon about 3. I received a phone call about 11 a.m. the next day confirming agreement. I think that is a clear indicator that the First Union instincts are very keen on what is important in the Roanoke Valley.
So, despite the cynicism of many in the community - and most especially some of the local news media - the community is not going to hell in a handbasket. Quite the contrary, I am absolutely confident we will soon have more jobs in Roanoke than we had before the merger.
But I am also confident that we have fulfilled our primary responsibility to our stockholders in a way that makes them very happy. And that is the one non-negotiable responsibility of the board - to care for the stockholders - that has not gotten much attention in the local media.
At the beginning of 1992, the market value of Dominion was about $415 million. By signing the definitive agreement to merge with First Union, we increased the value to $851 million. Today, with First Union's stock hovering near $50 per share, the Dominion stockholders have value in excess of $1 billion. Our stockholders are aware of that.
Also, I believe we would have had to wait at least until after the first quarter of 1994 to begin to pay a dividend . With this merger, Dominion stockholders will receive a dividend a little over two months from now. Believe me, our stockholders believe we did the right thing.
What has happened here is not the apocalypse. It is change - fundamental, basic, long-term change - just as happened when the railroad merged.
People don't like change - especially if it affects jobs - and I don't either. Each of the 850 jobs we initially targeted is occupied by a real live person, often involving children and families.
American industry continues these trends, is to make every effort to minimize the impact - and then to work hard for the long term to replace the affected jobs with new jobs. We're off to a very good start with that.
Warner Dalhouse, formerly chairman of Dominion Bankshares Corp., is chairman of First Union National Bank of Virginia. This is adapted from his speech Thursday to the Business Forum in Roanoke.
by CNB