The Wachovia bank and financial services operation was weak and tottering. Citibank cut a deal for Wachovia’s banking assets, and got backing from the Federal Deposit Insurance Corp. Citi would buy Wachovia’s branch banking network for $2 billion in stock and $12 billion in preferred shares for the FDIC. Everyone breathed a sigh of relief.
Today Wells Fargo stepped in, offering to absorb not just Wachovia’s branch banking operation, but Wachovia’s brokerage business and investment management division. Wachovia shareholders would get $15.1 billion in Wells Fargo common stock, and Wells Fargo would make Wachovia’s home town, Charlotte NC, its East Coast HQ.
Citibank wants to hold Wachovia to the prior deal, and Wachovia had agreed not to seek out another bidder enter talks that might facilitate a rival bid. The kicker: Wells Fargo and Wachovia had been negotiating before the Citbank-Wachovia agreement, so Wachovia can probably maintain it hasn’t violated the Citi agreement. While the FDIC officially supports the Citibank agreement, it wouldn’t have to kick in public funds if Wachovia took the Wells Fargo deal.
You can bet lots of lawyers will be spending the weekend looking at the Wachovia-Citibank agreement.
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