updated 6/21/2004 8:42:34 AM ET 2004-06-21T12:42:34

Banking giant Wachovia Corp. is buying competitor SouthTrust Corp. in a deal valued at $14.3 billion, the companies said Monday.

The combination will create the largest bank in the Southeastern U.S. and give Wachovia new leverage in the large Texas banking market.

“This transaction gives us clear leadership in a number of attractive, high-growth states, and extends our reach into new Southeastern and Southwestern states,” Ken Thompson, Wachovia’s chairman, president and CEO, said in a statement.

The enlarged Wachovia will have $464 billion in assets and market capitalization of $76 billion, maintaining its position as the nation’s fourth largest bank in terms of assets.

Wachovia currently has $411 billion in assets, with banking operations in 11 Eastern states and Washington, D.C. SouthTrust has $52.7 billion in assets and does business in nine Southern states.

The deal calls for Charlotte, N.C.-based Wachovia to exchange 0.89 shares of its common stock for each share of SouthTrust, which is based in Birmingham, Ala. The companies valued the deal at $14.3 billion, based on Wachovia’s closing stock price of $47 on Friday.

The companies said they expect the integration to take 15 months, a process that is likely to cost $431 million after taxes. After that initial period, the transaction should generate $255 million in annual after-tax cost reductions.

The deal is expected to close in fourth quarter of this year.

Wallace Malone, chairman and CEO of SouthTrust, will become vice chairman of Wachovia once the transaction is complete. He and two other members of SouthTrust’s board of directors will join the board of Wachovia.

Wachovia said the transaction will leave it with an additional $1.7 billion in cash, which it intends to use to buy back its own stock.

The announcement comes just two months after Wachovia’s Thompson downplayed chances of an acquisition in the short term.

“We have no need to do a deal and would not burden our shareholders with a bad one,” he said in a conference call with analysts April 19.

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