BANK MERGER FEVER : Wells Fargo Will Seek First Interstate Stock : Banking: Analysts say the move is primarily aimed at pressuring Wells’ takeover target into negotiating.

Wells Fargo & Co. on Monday turned up the heat on its takeover target, First Interstate Bancorp, announcing that it will seek clearance under federal antitrust law to start buying First Interstate stock.

Wells said it will notify the Federal Trade Commission and the Justice Department of its intention to buy a large amount of First Interstate stock on the open market, a possible first step toward a tender offer in which Wells would approach First Interstate’s shareholders directly instead of going through the board of directors.

However, analysts said the gambit was primarily aimed at pressuring First Interstate to start negotiating merger terms.

Meanwhile, the stock of both banks fell as investors worried that the deal would take longer and face more obstacles than initially expected. There was also concern that Wells’ stock--the currency in the deal--may be overvalued.

“It’s a mistake to say that this is a done deal,” analyst Christopher Kotowski of Oppenheimer & Co. said.

After gaining more than $34.25 last Wednesday on news of Wells’ unsolicited bid, First Interstate shares dropped $7.875 to $129.875 on heavy volume of 1.3 million shares, while Wells Fargo shares closed down $5.875 to $216.875, both in trading on the New York Stock Exchange.

San Francisco-based Wells’ offer of 0.625 share of its stock for each First Interstate share had an initial value of $10.1 billion. As Wells stock climbed to a trading high of $230.25 last week, the value reached more than $10.9 billion before sliding back to about $10.3 billion at the close of trading Monday.

Wells’ filing with the FTC and Justice Department, under the Hart-Scott-Rodino Act, normally would be a minor part of the regulatory paperwork involved in a bank merger, said lawyer Howard Adler of Gibson, Dunn & Crutcher in Washington. The filing is necessary when a company intends to buy either $15 million worth, or 15%, of another company’s stock.

By calling attention to it with a public announcement, Wells is trying to increase the pressure on First Interstate to start negotiating merger terms, Adler said. The next step could be a tender offer or some other means of appealing directly to stockholders, he said.

First Interstate, which refused to comment on the latest Wells action, has said nothing publicly since Wells made its bid public last week. At that time, First Interstate Chairman and Chief Executive William E.B. Siart said he was “very disappointed” at Wells’ action but that the board would consider the offer.

Although the Los Angeles-based bank is maintaining public silence, it has approached major institutional shareholders and asked for their support while it prepares a response, according to one investment manager whose firm owns a large First Interstate stake.

Some investors are selling out of First Interstate because they like the current price--nearly a third above what it was selling for a week ago--and are worried about delays and other problems.

“The fact that this may be hostile worries people,” said analyst Campbell K. Chaney of the Rodman Renshaw brokerage in San Francisco. If First Interstate doesn’t let Wells Fargo look at its books, the acquirer won’t know what kind of loans it’s buying, which adds uncertainty, Chaney said. “The markets hate uncertainty.”

The question of whether Wells’ stock price is inflated is another concern, Oppenheimer’s Kotowski said. Wells’ stock trades at more than three times book value, or the difference between its assets and liabilities. No other comparably sized bank trades at such a rich multiple, he said.

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