New Twist In Wells Fargo-Wachovia Deal
The battle for control of the nation’s fourth-largest bank, Wachovia Corp., took a surprise turn Friday night, Oct. 3. Earlier that same day, Wells Fargo announced its intent to purchase Wachovia in an all-stock deal for $15.1 billion. Upon hearing the news, Citigroup headed to court to block the acquisition, claiming it violated a prior exclusivity agreement that prohibited Wachovia from discussing a merger with any entity other than Citigroup until Oct. 6.
As of Saturday, it appears Citigroup may have the upper hand. A New York federal judge issued a ruling to temporarily block the sale of Wachovia to San Francisco-based Wells Fargo.
Three days before Wells Fargo announced its merger with Wachovia, Citigroup was negotiating a cut-price deal to buy Wachovia’s banking operations for $2.1 billion. As part of the transaction, the Federal Deposit Insurance Corp. (FDIC) would have taken on any loan losses from Wachovia in excess of $42 billion in exchange for a $12 billion stake in Citigroup.
Before the agreement could be finalized, however, Wells Fargo upped the ante, offering Wachovia significantly more money for its operations. Wells Fargo’s proposal also did not entail any financial backing from the FDIC.
Meanwhile, as the spurned suitor, Citigroup reportedly is seeking $60 billion in damages from Wells Fargo for interfering with the initial transaction, according to the Oct. 5 Sunday edition of the New York Times.
Despite the court’s ruling, both Wells Fargo and Wachovia say they intend to move forth with their previously announced merger.
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