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Wells Fargo To Acquire Wachovia
Citi seethes at the announcement, and threatens legal action following FDIC chairman’s support.
October 3, 2008
Consumer bank holding company Wells Fargo agreed to acquire Wachovia in a $15.1 billion deal. The transaction would scuttle a deal announced on Monday in which Citigroup was to acquire Wachovia’s banking operations for $2.2 billion.
Charlotte-based Wachovia will remain intact and will continue to operate as a united entity.
The stock-for-stock transaction with Wells Fargo will combine Wachovia’s geographic emphasis on the East Coast with Wells Fargo’s West Coast regional focus. Wells Fargo is based in San Francisco.
The merger is expected to create the US' largest deposit base. Each common share of Wachovia stock will be exchanged for 0.1991 shares of Wells Fargo common stock.
Wachovia president and chief executive Robert Steel said, “This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support. The market presence and composition of our businesses, along with our service-oriented cultures, are extraordinarily complementary and this combination creates great potential for sustained stability and growth.”
In an analyst report obtained by Thomson ONE Analytics, Matthew O’Connor of UBS characterized the transaction as a “win-win,” adding that it is a better deal for Wachovia shareholders than the Citigroup agreement.
In another analyst report provided by Thomson ONE Analytics, Barclays Capital’s Jason Goldberg noted that the Citigroup transaction was a positive development for the bidder, and he “wouldn’t be surprised” to see Citigroup consider other retail transactions in the US
Rodman & Renshaw CEO Michael Lacovara called the agreement “a great deal for [Wells Fargo chairman Richard] Kovacevich.”
Sheila Bair, chairman of Federal Deposit Insurance Corp., said the agency “stands behind its previously announced agreement with Citigroup."
Citigroup shares fell from $22.50 on Thursday’s close to $19.34 Friday morning. Later, the company issued a statement threatening legal action, and demanded that Wachovia and Wells Fargo terminate their agreement. “Wachovia's agreement to a transaction with Wells Fargo is in clear breach of an exclusivity agreement between Citi and Wachovia,” Citi said.
Wachovia stock soured to $6.95 this morning on news of the transaction, and wavered minimally following the Citi’s posturing. As of press time, Wachovia stock traded at $6.78 per share.
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