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Finally Wells Fargo wins bidding war for Wachovia Beats Citi!

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 10, 2008

Apparently after getting a closer look at Wachovia’s books, CitiGroup has decided that they don’t really want Wachovia after all. Citi has it’s own trouble, never unstood why they wanted more of it. Wells can afford to take a hit, but in the long run they got branches covering the whole nation. Citigroup said it has decided to walk away from a deal entailing acquisition of Wachovia, paving way for rival Wells Fargo to acquire the troubled American bank for about $15 billion.

“We are proud to have been part of an historic transaction that was supported by all of the federal banking agencies and the Secretary of the Treasury, after consultation with the President, and that we carefully designed to avoid systemic stress and to advance interests of our shareholders,” Citigroup said in a statement.

No agreement has been reached with Wells Fargo following several days of discussions about matters relating Wachovia, Citigroup said adding that the dramatic differences in the parties’ transaction structures and their views of the risks involved made it impossible to reach a mutually acceptable agreement.

The battle between financial giants Citigroup and Wells Fargo began after Wachovia dumped the $2.2 billion deal with Citi in favour of a better offer from Wells Fagro.
Earlier on September 29, regulator FDIC has facilitated Citigroup’s acquiring banking operations of Wachovia. Citigroup claimed Wells Fargo had interfered with its negotiations to buy Wachovia. Lawsuits by both sides followed. Then federal government officials attempted to broker a deal, which generally called for Wachovia to be divided among geographic lines. Those negotiations went on for most of this week. “The dramatic differences in the parties’ transaction structures and their views of the risks involved made it impossible to reach a mutually acceptable agreement,” Citi said in a statement Thursday.

However on October 3, Wachovia had announced a new deal entailing its merger with rival Wells Fargo in an all- stock transaction worth about $15.1 billion.

Meanwhile in a statement, the Federal Reserve today said it will immediately begin consideration of the filings submitted by Wells Fargo for approval to acquire Wachovia.

The Fed has acknowledged efforts of Citi Group and Wells Fargo to reach an accord regarding Wachovia acquisition. While no agreement between Wells Fargo and Citi was reached, the two parties have indicated that they will no longer seek injunctive relief to prevent a transaction. Citigroup’s capitulation means Wells Fargo is free to complete its $15.1 billion deal to capture Wachovia. The purchase would make San Francisco-based Wells a coast-to-coast bank and give Wells a major presence on the East Coast and in the Southeast for the first time. “This transforms Wells Fargo,” said Joseph Morford, an analyst with RBC Capital Markets. “Strategically, the deal is a real coup for Wells.” The new bank will retain the Wells Fargo name.

Together, Wells Fargo and Wachovia would command $1.42 trillion in assets and $787 billion in deposits. This makes me wonder how bad does Citigroup need Wachovia assets to shore up its balance sheet?

Wells Fargo becomes a national brand while the taxpayers fund the expansion opportunity. While Citi offered a fed back $2.1B, does anyone really believe the Wells $15B offer won’t be augmented with, um, Fed backed bailout monies??

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