Citi and Wells Fargo Fight over Wachovia

Over the week-end, the lawyers and leaders of Citi and Wells Fargo argued with each other and with federal regulators over the fate of Wachovia Corp., a bank on its way to failure. The two have rival bids, and Citi claims it had an exclusive arrangement, while Wells Fargo will cost the taxpayers nothing. A solomonic solution appears inevitable, cutting Wachovia in two.

Mark Calvey of the San Francisco Business Times wrote, “Citi is threatening additional litigation this week to preserve an agreement in principal in which it would acquire Wachovia’s banking operations for $2.16 billion in a deal hastily arranged by the Federal Deposit Insurance Corp. on Sept. 29. Citi, whose deal involves substantial government assistance, has since indicated it is willing to increase the price and expand the amount of Wachovia’s operations it is willing to buy. But Wachovia said Friday it had accepted a $15.1 billion bid that was already approved by the Wells Fargo (NYSE:WFC) board and presented late the previous day to Wachovia’s board.”

Wells Fargo issued a statement that read, “Wells Fargo and Wachovia have a firm, binding merger agreement. That agreement represents a transaction that, in stark contrast to Citigroup’s proposal, provides significant and certain value to Wachovia shareholders, keeps Wachovia intact, is better for all of Wachovia’s stakeholders including its employees and does not demand financial support from our government. We are confident that we will complete our announced merger with Wachovia. Nothing in the court’s temporary order impacts our ability to ultimately do that.”

Wachovia spokeswoman said, “Wachovia believes its agreement with Wells Fargo is proper, valid and is in the best interest of shareholders, employees and the American taxpayers. Citigroup is always free to make a superior offer to Wachovia.”

There is a twist to this, however, that Mr. Calvey noted. In the $700 billion bail out that became law on Friday, there is “a provision that contracts involving pending acquisitions in which the FDIC is involved might not ‘be enforceable’.” Citi’s lawyers will earn their pay this month.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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