Wachovia Nixes Deal with Citi, Plans Wells Fargo Merger
Saturday, October 04, 2008
Wachovia has agreed to sell its operations to Wells Fargo in an all-stock transaction for $15.1 billion, reneging on its intent to sell to Citigroup announced earlier this week. Wachovia and Wells Fargo both disclosed this morning that they have signed a definitive agreement for the merger of the two companies “in a whole company transaction that will require no financial assistance from the Federal Deposit Insurance Corporation (FDIC) or any other government agency.”
Prior to receiving the merger proposal from Wells Fargo, Wachovia had been negotiating with Citigroup to complete a transaction supervised by the FDIC that included assistance from the government. Under terms of the transaction, Citigroup would have paid Wachovia about $1 per share and nearly tripled its U.S. deposits, to more than $600 billion. Wells Fargo has agreed to trade its common stock for Wachovia's at a rate of 0.1991, representing a value of $7 per share – a figure well above Wachovia's closing price on Thursday of $3.91.
Just hours after Wachovia's merger announcement, Citigroup issued its own statement, claiming that the transaction with Wells Fargo is “in clear breach of an Exclusivity Agreement between Citi and Wachovia.” Citi has demanded that Wachovia and Wells Fargo terminate and not proceed with the proposed transaction, threatening legal action otherwise.
Commenting on the news, FDIC Chairman Sheila C. Bair said, “The FDIC stands behind its previously announced agreement with Citigroup. The FDIC will be reviewing all proposals and working with the primary regulators of all three institutions to pursue a resolution that serves the public interest.”
Wells Fargo Chairman Dick Kovacevich said the agreement with his company represents a compelling value for Wahovia's shareholders. “It provides superior value compared to the previous offer to acquire only the banking operations,” Kovacevich added.
The boards of both Wachovia and Wells Fargo unanimously approved the transaction late last night. Robert K. Steel, president and CEO of Wachovia said that the deal with Wells Fargo is the best move for all Wachovia's constituencies – shareholders, customers, colleagues, and communities. “This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support,” Steel said.
Prior to receiving the merger proposal from Wells Fargo, Wachovia had been negotiating with Citigroup to complete a transaction supervised by the FDIC that included assistance from the government. Under terms of the transaction, Citigroup would have paid Wachovia about $1 per share and nearly tripled its U.S. deposits, to more than $600 billion. Wells Fargo has agreed to trade its common stock for Wachovia's at a rate of 0.1991, representing a value of $7 per share – a figure well above Wachovia's closing price on Thursday of $3.91.
Just hours after Wachovia's merger announcement, Citigroup issued its own statement, claiming that the transaction with Wells Fargo is “in clear breach of an Exclusivity Agreement between Citi and Wachovia.” Citi has demanded that Wachovia and Wells Fargo terminate and not proceed with the proposed transaction, threatening legal action otherwise.
Commenting on the news, FDIC Chairman Sheila C. Bair said, “The FDIC stands behind its previously announced agreement with Citigroup. The FDIC will be reviewing all proposals and working with the primary regulators of all three institutions to pursue a resolution that serves the public interest.”
Wells Fargo Chairman Dick Kovacevich said the agreement with his company represents a compelling value for Wahovia's shareholders. “It provides superior value compared to the previous offer to acquire only the banking operations,” Kovacevich added.
The boards of both Wachovia and Wells Fargo unanimously approved the transaction late last night. Robert K. Steel, president and CEO of Wachovia said that the deal with Wells Fargo is the best move for all Wachovia's constituencies – shareholders, customers, colleagues, and communities. “This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support,” Steel said.
