Wachovia Battle Heats Up

By Jennifer Yousfi
 

The battle for battered bank Wachovia Corp. (WB) is heating up with Citigroup Inc.’s (C) win of a court order to extend negotiations, while Wells Fargo & Co. (WFC) contends its merger agreement still stands.

Late Saturday evening, Citi won a court order from New York State Supreme Court Justice Charles Ramos granting an injunction to extend the exclusive negotiation period between Citigroup and Wachovia.

The original agreement between Citi and Wachovia, reached with assistance and backing from the Federal Deposit Insurance Corp. (FDIC) did not include a signed merger agreement. However, it did grant Citi exclusive rights to negotiate with Wachovia through Monday.

Wells Fargo’s agreement with Wachovia was announced on Friday, well before the exclusive negotiation clause’s deadline. Despite this breach and the finding by the court, Wells Fargo remains confident in its agreement.

"Wells Fargo and Wachovia have a firm, binding merger agreement,” Wells Fargo announced in a statement released Sunday.

“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,” the statement read.

Wells Fargo’s $15 billion, or $7 a share, for all Wachovia operations easily trumps Citigroup’s $2.16 billion, or $1 per share, offer for just Wachovia’s deposits, loan portfolio, and retail banking branches. The Citigroup offer did not include Wachovia’s A.G. Edwards brokerage unit or Evergreen Investment Management Co. LLC mutual fund family.

Wells Fargo also has the advantage of not relying on any government assistance to complete its proposed merger with Wachovia.

But Wachovia did breach its original agreement with Citigroup.

“Any such agreement between Wachovia and Wells Fargo is illegal,” Vikram Pandi, chief executive officer of Citigroup, said after the Wells Fargo announcement on Friday.

However, given the two banks signed a non-binding term sheet, rather than a formal binding merger agreement, Citigroup might have little recourse unless it chooses to up its own bid for Wachovia.

“I’m still not convinced that Citigroup can force this sale to happen,” Elizabeth Nowicki, a professor at Tulane University Law School in New Orleans and a former M&A lawyer at Sullivan & Cromwell, told Bloomberg News. “Citigroup may be facing the chance to get themselves a small settlement, and that’s a nice shot in the arm for a company that’s struggling.”

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Comments

[Ishortyou:]

Now that the 'bail out' plan came through, Wachovia needs fast to take advantage of it, it needs to sell its toxic loan portafolio from its banking subsidiaries around 122 billion if not more to the government close to even cost prices and take serious advantage of the tax break plan and remediate their banking book of business. They also need to contact their customers that did the run on the bank like chickens without head to bring their deposits back and reassure them that they are ok and there is not reason to panic because of the talking heads of FOX news and rest of media and the incompetence of the FDIC. This strategy will demonstrate to the public that the current 'bail out' plan is working and that Wachovia is the first product of it. Is anybody calling the regulators that oversight the FDIC for its unethical behaviour?

2008 Oct 06 07:02 AM