| Filed by Wachovia Corporation pursuant to Rule 425 under the Securities Act of 1933, as amended, and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934, as amended
Subject Company:
Westcorp Commission File No.: 001-09910
Date: September 12, 2005 |
This filing contains certain forward-looking statements with respect to each of Wachovia Corporation (“Wachovia”), Westcorp, WFS Financial Inc (“WFS Financial”) and the combined companies following the proposed merger between Wachovia and Westcorp (the “Westcorp Merger”) and Wachovia’s acquisition, by merger, of the 16% interest in WFS Financial held by the public (the “WFS Financial Merger” and, together with the Westcorp Merger, the “Mergers”), as well as the goals, plans, objectives, intentions, expectations, financial condition, results of operations, future performance and business of Wachovia, including, without limitation, (i) statements relating to the benefits of the Mergers, including future financial and operating results, cost savings, enhanced revenues and the accretion to reported earnings that may be realized from the Mergers, (ii) statements regarding certain of Wachovia’s, Westcorp’s and/or WFS Financial’s goals and expectations with respect to earnings, earnings per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (iii) statements preceded by, followed by or that include the words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan”, “projects”, “outlook” or similar expressions. These statements are based upon the current beliefs and expectations of Wachovia’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond Wachovia’s control).
The following factors, among others, could cause Wachovia’s financial performance to differ materially from that expressed in such forward-looking statements: (1) the risk that the businesses of Wachovia, Westcorp and WFS Financial in connection with the Mergers will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the Mergers may not be fully realized or realized within the expected
time frame; (3) revenues following the Mergers may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the Mergers, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the Mergers on the proposed terms and schedule; (6) the failure of Westcorp’s and WFS Financial’s shareholders to approve the Westcorp Merger and the WFS Financial Merger, respectively; (7) the strength of the United States economy in general and the strength of the local economies in which Wachovia, Westcorp and/or WFS Financial conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on Wachovia’s, Westcorp’s and/or WFS Financial’s loan portfolio and allowance for loan losses; (8) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (9) potential or actual litigation; (10) inflation, interest rate, market and monetary fluctuations; and (11) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on Wachovia’s capital markets and capital management activities, including, without limitation, Wachovia’s mergers and acquisition advisory business, equity and debt underwriting activities, private equity investment activities, derivative securities activities, investment and wealth management advisory businesses, and brokerage activities. Additional factors that could cause Wachovia’s, Westcorp’s and WFS Financial’s results to differ materially from those described in the forward-looking statements can be found in Wachovia’s, Westcorp’s and WFS Financial’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC. All subsequent written and oral forward-looking statements concerning Wachovia or the proposed Mergers or other matters and attributable to Wachovia or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. Wachovia, Westcorp and WFS Financial do not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this filing.
The proposed Mergers will be submitted to Westcorp’s and WFS Financial’s shareholders for their consideration. Wachovia will file a registration statement, which will include a proxy statement/prospectus, Westcorp and WFS Financial will file a proxy statement, and each of Wachovia, Westcorp and WFS Financial may file other relevant documents concerning the proposed Mergers with the SEC. Shareholders are urged to read the registration statement and the proxy statement/prospectus regarding the proposed Mergers when they become available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about Wachovia, Westcorp and WFS Financial, at the SEC’s website (http://www.sec.gov). You will also be able to obtain these documents, free of charge, at Wachovia’s website (http://www.wachovia.com) under the tab “Inside Wachovia - Investor Relations” and then under the heading “Financial Reports - SEC Filings”. Copies of the proxy statement/prospectus and the SEC filings that will be incorporated by reference in the proxy statement/prospectus can also be obtained, free of charge, by directing a request to
Wachovia Corporation, Investor Relations, One Wachovia Center, 301 South College Street, Charlotte, NC 28288-0206, (704)-374-6782; or to Westcorp or WFS Financial, Attn: Investor Relations, 23 Pasteur, Irvine, CA 92618, (949)-727-1002.
Wachovia, Westcorp and WFS Financial and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies from the shareholders of Westcorp and/or WFS Financial in connection with the proposed Mergers. Information about the directors and executive officers of Wachovia is set forth in the proxy statement for Wachovia’s 2005 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 14, 2005. Information about the directors and executive officers of Westcorp is set forth in the proxy statement for Westcorp’s 2005 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 28, 2005, and information about the directors and executive officers of WFS Financial is set forth in the proxy statement for WFS Financial’s 2005 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 28, 2005. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement/prospectus regarding the proposed Mergers when it becomes available. You may obtain free copies of these documents as described in the preceding paragraph.
THE FOLLOWING ARE MATERIALS USED IN A PRESENTATION HELD ON
SEPTEMBER 12, 2005 REGARDING THE MERGERS
Creates national presence in significant
consumer lending category
Presentation to Investors
September 12, 2005
Enhances consumer lending platform
National best-in-class auto loan originator
Creates #9 auto loan originator in the nation
Provides immediate scale in attractive, fragmented consumer finance market
Further diversifies Wachovia’s balance sheet into higher yielding/ROE assets
Provides modest entry into Southern California banking market
In line with previous acquisition guidance
Immediately accretive to cash EPS and to GAAP EPS in year two
IRR in excess of 15% hurdle rate without revenue synergies
Conservative credit loss assumptions used in financial analysis
Significant synergy opportunities
Revenue synergies through deeper penetration of both footprints
Funding synergies through better allocation of excess deposit funding
Cost synergies from select back office consolidation
Approximately 6,400 hours of due diligence completed
Outstanding underwriting culture supported by state of the art technology
Significant economic shock factors included in overall analysis
Strategic Rationale
Financially Sound
Risk Mitigation
Page 1
Transaction summary
Consideration*
Westcorp $3.42 billion in stock
WFS Financial $0.49 billion in stock
Public Minority Interest
Total $3.91 billion
Exchange Ratio*
Westcorp 1.2749 Wachovia shares for each Westcorp share
WFS Financial 1.4661 Wachovia shares for each WFS Financial share Public Minority Interest
Timing Expected closing 1st quarter 2006
Approvals Regulatory and WES/WFSI shareholder approvals (WFSI majority of public shareholders); HSR antitrust filing
Due Diligence Completed on both sides
Other Termination fee payable to Wachovia in certain circumstances
Assumes issuance of $1 billion of Tier I preferred securities; proceeds available for share repurchases
Rady, Chairman, has entered into voting agreement
*Exchange ratio based on WB 5-day average closing price per share of $50.20 as of 9/9/05.
Page 2
Westcorp overview
Company Structure
Nationwide leader in auto finance
$16 billion S. California
bank holding company
19 branches
$12 billion auto finance
portfolio; $2 billion in deposits
30-year record of success through
all economic cycles
Strong credit history
Consistent, high quality earnings
15 year EPS CAGR of 15.5%
Ranked #1 non-captive in customer service by JD Powers
Seasoned management team
State-of-the-art management systems
46%
54%
Ernest
Rady
Westcorp
Public
100%
Western Financial Bank
84%
Public
WFS Financial
16%
Page 3
Westcorp - auto lending ranking by state
Westcorp ranks #2 in CA, NV, and WA and is a top 10 player throughout the West and
Southwest markets with strength in Hispanic markets.
WES Dealer Relationships
Managed Receivables in millions
Ranking by State
Page 4
Modest entry into CA banking market
Market Share – Orange County
Branch Map
Rank
Holding Company
% of Market
1
Bank of America Corp.
20.56%
2
Washington Mutual Inc.
13.30%
3
Wells Fargo & Co.
12.92%
4
Fremont General Corp.
5.82%
5
UnionBanCal Corp.
5.66%
6
Golden West Financial
5.43%
7
Downey Financial Corp.
4.10%
8
Citigroup Inc.
3.59%
9
Westcorp
2.05%
10
Zions Bancorp.
2.00%
11
Commercial Capital Bancorp
1.89%
12
BNP Paribas Group
1.86%
13
FBOP Corp.
1.73%
14
U.S. Bancorp
1.50%
15
F&M Bank of Long Beach
1.31%
Source: SNL DataSource
Data as of 6/30/04
Page 5
Auto finance market
60 million autos sold per annum
Banks expected to gain market share over captives
Other than captives, no participant has more than 6% share
72,000 franchised and independent dealers nationwide
Top Originators of Auto Loans*
(in thousands)
YTD June 2005
Vehicles Financed
Market Share***
Credit Quality****
20%
Non
Prime
37%
Others
63%
Captive
Auto
Finance
10%
Sub Prime
70%
Prime
*Source Auto Count Inc. (By vehicles financed, 38 states.)
**Includes Wells Fargo Financial Acceptance and Wells Fargo Auto Finance
***Source Big Wheels 2004 Auto Finance Report
****CNW Marketing Group
Rank
Originator
732
GMAC
1
Ford Motor Credit
2
617
Daimler Chrysler Financial Services
3
565
Toyota Financial Services
4
466
American Honda Finance
5
399
Chase Auto Finance
6
319
Nissan Infiniti Financial Services
7
244
Wells Fargo**
8
197
Wachovia/Westcorp
9
196
Bank of America
10
189
Page 6
Wachovia and Westcorp – combined Dealer Financial Services
9th largest auto loan originator
57 nationwide offices serving 47 states
Relationships with 11,000 dealers and 1.2 million indirect customers
267 sales managers and representatives
$19B managed consumer loan portfolio
$3.3B commercial loan portfolio
Established, consistent securitization track record
June 2005 Combined DFS Consumer Portfolio June 2005 Combined WB/WFS
$17B managed
auto loan portfolio
$1.4B marine/RV portfolio
$9.4B TTM* auto originations
Average life of
portfolio 2.8 years
Total Consumer
Credit Profile***
Auto Portfolio
Credit Profile
Type
6%
Sub
Prime**
22%
Sub
Prime**
42%
New
94%
Prime
78%
Prime
58%
Used
*Trailing Twelve Months.
**Sub prime defined as FICO <620 for secured credit and ignores custom scoring characteristics.
***Reflects managed Consumer loan assets except student loans and real estate secured off-balance sheet securitizations.
Page 7
Attractive risk/returns
20%
Americredit
Triad
Household
Wells Fargo¹
Citi
15%
Capital One¹
PF WB/WFS
WFS
Wachovia DFS
10%
Onyx
Daimler Chrysler
APR
Chase Auto
Capital One²
Toyota
BMW
5%
Ford
Honda
Mitsubishi
Nissan
VW of America
0%
GMAC
(5)%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
(2)%
(4)%
20%
Expected Cumulative Losses Per Loan
Source: Goldman Sachs ABS Finance estimates, rating agencies reports, public filings
Note: Size of circle represents managed receivables; APR based on recent transaction.
¹ Sub-prime only.
² Prime only.
Page 8
Appendix
Westcorp contract profile
Prime
Non-prime
Established Borrower:
Annual Income
$74,439
$61,451
Time at Job (Years)
7.5
5.4
Time at Residence (Years)
6.7
5.1
Strong Collateral:
Vehicle Age (Years)
2.2
2.8
$18,664
$15,411
Disciplined Structuring:
Amount Financed
APR
10.19%
15.96%
Term (Months)
67
63
Expected portfolio pre-tax return 2.5% – 3.5%
Information for the quarter ended March 31, 2005
Page 10
Westcorp strong dealer relationships
Relationships matter
Consistent loan volumes
Better pricing
Higher conversion
Westcorp makes dealer service priority number one
Dependable, long standing market player
Consistent buying practices
Full spectrum of prime and non-prime credit
Prompt decision and quick funding
Ranked #1 in customer service by a non-captive
by JD Powers
Page 11
Overall automobile dealer satisfaction
Rank
Originator
Ranking
1
GMAC
933
2
Chrysler Financial Corp
912
3
Ford Credit
886
4
Westcorp
836
5
Bank One
836
6
Wells Fargo Bank
817
7
Arcadia Financial
815
8
Triad Financial Corp
814
9
Nuvell Credit
807
10
Fireside Thrift
802
Source: JD Powers and Associates – July 2004
Page 12
Cautionary statement
Forward-Looking Statements
This presentation contains certain forward-looking statements, including, without limitation, (i) statements relating to the benefits of the proposed merger between Wachovia and Westcorp (the “Westcorp Merger”) and Wachovia’s acquisition, by merger, of the 16% interest in WFS Financial Inc (“WFS Financial”) held by the public (the “WFS Financial Merger” and, together with the Westcorp Merger, the “Mergers”), including future financial and operating results, cost savings, enhanced revenues and the accretion to reported earnings that may be realized from the Mergers, (ii) statements regarding certain of Wachovia’s, Westcorp’s and/or WFS Financial’s goals and expectations with respect to earnings, earnings per share, revenue, expenses and the growth rate in such items, as well as other measures of economic performance, including statements relating to estimates of credit quality trends, and (iii) statements preceded by, followed by or that include the words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan” or similar expressions. These statements are based upon the current beliefs and expectations of Wachovia’s, Westcorp’s and WFS Financial’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ materially from that expressed in such forward-looking statements: (1) the risk that the businesses of Wachovia, Westcorp and WFS Financial in connection with the Mergers will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected revenue synergies and cost savings from the Mergers may not be fully realized or realized within the expected time frame; (3) revenues following the Mergers may be lower than expected; (4) deposit attrition, operating costs, customer loss and business disruption following the Mergers, including, without limitation, difficulties in maintaining relationships with employees, may be greater than expected; (5) the ability to obtain governmental approvals of the Mergers on the proposed terms and schedule; (6) the failure of Westcorp’s and WFS Financial’s shareholders to approve the Westcorp Merger and the WFS Financial Merger, respectively; (7) the strength of the United States economy in general and the strength of the local economies in which Wachovia, Westcorp and/or WFS Financial conducts operations may be different than expected resulting in, among other things, a deterioration in credit quality or a reduced demand for credit, including the resultant effect on Wachovia’s, Westcorp’s and/or WFS Financial’s loan portfolio and allowance for loan losses; (8) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (9) inflation, interest rate, market and monetary fluctuations; and (10) adverse conditions in the stock market, the public debt market and other capital markets (including changes in interest rate conditions) and the impact of such conditions on Wachovia’s capital markets and capital management activities, including, without limitation, Wachovia’s mergers and acquisition advisory business, equity and debt underwriting activities, private equity investment activities, derivative securities activities, investment and wealth management advisory businesses, and brokerage activities. Additional factors that could cause Wachovia’s, Westcorp’s and WFS Financial’s results to differ materially from those described in the forward-looking statements can be found in Wachovia’s, Westcorp’s and WFS Financial’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC. All subsequent written and oral forward-looking statements concerning the proposed Mergers or other matters and attributable to Wachovia, Westcorp or WFS Financial or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Wachovia, Westcorp and WFS Financial do not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this presentation.
Page 13
Cautionary statement continued
Additional Information
The proposed Mergers will be submitted to Westcorp’s and WFS Financial’s shareholders for their consideration. Wachovia will file a registration statement, which will include a proxy statement/prospectus, Westcorp and WFS Financial will file a proxy statement, and each of Wachovia, Westcorp and WFS Financial may file other relevant documents concerning the proposed Mergers with the SEC. Shareholders are urged to read the registration statement and the proxy statement/prospectus regarding the proposed Mergers when they become available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about Wachovia, Westcorp and WFS Financial, at the SEC’s website (http://www.sec.gov). You will also be able to obtain these documents, free of charge, at Wachovia’s website (http://www.wachovia.com) under the tab “Inside Wachovia – Investor Relations” and then under the heading “Financial Reports - SEC Filings”. Copies of the proxy statement/prospectus and the SEC filings that will be incorporated by reference in the proxy statement/prospectus can also be obtained, free of charge, by directing a request to Wachovia Corporation, Investor Relations, One Wachovia Center, 301 South College Street, Charlotte, NC 28288-0206, (704)-374-6782; or to Westcorp or WFS Financial, Attn: Investor Relations, 23 Pasteur, Irvine, CA, 92618, (949)-727-1002.
Wachovia, Westcorp and WFS Financial and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies from the shareholders of Westcorp and/or WFS Financial in connection with the proposed Mergers. Information about the directors and executive officers of Wachovia is set forth in the proxy statement for Wachovia’s 2005 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 14, 2005. Information about the directors and executive officers of Westcorp is set forth in the proxy statement for Westcorp’s 2005 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 28, 2005, and information about the directors and executive officers of WFS Financial is set forth in the proxy statement for WFS Financial’s 2005 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 28, 2005. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement/prospectus regarding the proposed Mergers when it becomes available. You may obtain free copies of these documents as described in the preceding paragraph.
Page 14