Citigroup, Wells Fargo Still Battling Over Wachovia
After a weekend of court battles, Citigroup and Wells Fargo are still battling over who has the right to purchase Wachovia. It now appears the two banks may each get a piece—but without any help from the government.
Citigroup, which was in the middle of hammering out merger plans with Wachovia after agreeing to buy its banking operations for a paltry $2.1 billion, was caught flat-footed by Wells Fargo’s sudden $15-billion interest in Wachovia’s entire business. Citi went to the courts on Friday to extend the deadline for settling on a deal with Wachovia—initially set for today—and was granted until the end of the work week to resolve discussions. However, a New York state appeals court overturned that lower court’s decision, in effect leaving Citigroup until the end of Monday to hammer out a deal. Citigroup, which says Wachovia has reneged on a binding deal, plans to appeal the decision, according to published reports.
That deal included an exclusivity agreement, which would have restricted Wachovia from holding discussions with other suitors. However, the government’s financial rescue package—which Bush signed into law on Friday—includes a provision that makes certain agreements such as these unenforceable. A spokesman for Wells Fargo was quoted in The Wall Street Journal as saying the statutory language “invalidates Wachovia’s claimed exclusivity agreement with Citi.”
In the meantime, federal regulators are urging Citigroup and Wells Fargo to quit quibbling and to come to some sort of compromise in the interest of market confidence. One rumored plan includes splitting up Wachovia’s bank branches in accordance with the current footprints of the two competing firms—giving the Northeast and Mid-Atlantic branches to Citi, and the Southeast and California branches to Wells Fargo. Wells Fargo would also get Wachovia’s brokerage unit, Wachovia Securities, and its asset management business—neither of which Citigroup was interested in buying.
If Wachovia goes to Wells Fargo, or if they split the firm up between Citigroup and Wells Fargo, the big shift would be in the absence of government help. The FDIC had assured Citigroup it would take on Wachovia’s toxic loan portfolio. That would not be the case if Wells Fargo becomes the buyer of all—or part—of the firm. According to reports, a sworn affidavit by Wachovia CEO Robert Steele indicates the FDIC prefers a marriage with Wells Fargo for this reason.
