WELLS FARGO STAGING MERGER.

Byline: Timothy L. O'Brien and Laura M. Holson The New York Times

In the banking industry's latest megamerger, Norwest Corp. of Minneapolis and Wells Fargo & Co. of San Francisco plan to join forces and may announce the $34 billion deal as early as today, according to people close to both companies.

Although the transaction is structured as a so-called merger of equals, Norwest's chief executive, Richard Kovacevich, will run the combined company as chief executive while Wells' chief executive, Paul Hazen, will relinquish that post.

The new bank will be based in San Francisco and retain the Wells Fargo name. With combined assets of $185 billion, it will rank as the sixth-largest bank in the United States if all other bank mergers announced this year are completed.

The logic of the merger follows a now-familiar pattern: Many banks, stuck in an industry with little revenue growth and heightened competition from brokerage firms, mutual funds and credit card companies, see size as a solution to their woes. Bulking up, banks believe, will enable them to become more profitable by dominating certain markets and enjoying greater economies of scale.

It is the latest in a string of bank-related blockbusters this year that have surprised Wall Street, including the mergers of Citicorp and Travelers Group, BankAmerica Corp. and Nationsbank Corp., and First Chicago NBD and Banc One Corp.

Kovacevich, considered to be one of the most disciplined and talented executives in banking, said in a recent interview that he felt no need to merge with another bank and that he found the recent prices being paid for banks to be exorbitant.

On the other hand, Kovacevich has said he would buy another bank if the price was right, and in this case it apparently was. Norwest will exchange about 10 shares for each Wells share, representing a premium of only about 10 percent to Wells' closing stock price on Friday.

Big Wells investors, such as Warren Buffett, were apparently willing to accept a slim takeover premium based on the combined company's prospects. As of last December, Buffett owned 7.87 percent of the company.

Wells would have been unthinkable as a takeover target a few years ago, when it emerged as the victor in a hotly contested battle for First Interstate Corp. of Los Angeles, but Wells botched the integration of the two banks. That cost Wells precious profits and customers, and brought Hazen, long considered a skilled manager, some unaccustomed criticism from analysts and Wall Street.