Post by AggieGroove on Oct 3, 2008 13:17:57 GMT -5
Hey Decks, what will be your guys new name?
money.cnn.com/2008/10/03/news/companies/wells_fargo_wachovia/index.htm?postversion=2008100312
Wells, Citi square off in Wachovia bid
Hours after Wells Fargo announced plans to buy Wachovia for $15B, Citigroup, which agreed to buy Wachovia bank assets Monday, demands firms terminate deal.
Citi demanded Wells Fargo terminate its proposed deal with Wachovia on Friday, claiming it is 'clear breach' of an exclusivity agreement.
NEW YORK (CNNMoney.com) -- Wachovia and Wells Fargo announced plans to merge Friday, just four days after Citigroup said it would buy Wachovia's banking assets. But Citigroup is not giving up on its plans to buy Wachovia just yet.
Citigroup (C, Fortune 500), which offered $2.2 billion for Wachovia's banking operations Monday, demanded that Wachovia and Wells Fargo terminate the proposed transaction. In a statement, Citigroup said the Wells Fargo merger would break an exclusivity agreement it had with Wachovia.
Unlike the Citigroup-Wachovia deal, Wells Fargo (WFC, Fortune 500) intends to absorb all of Wachovia's assets including its vast deposit network, its massive brokerage business and investment management division.
Wachovia shareholders would receive 0.1991 shares of Wells Fargo common stock in exchange for each share of Wachovia common stock in the transaction, valuing the deal at roughly $7 per Wachovia common share, or approximately $15.1 billion.
In a conference call with investors Friday morning, Wachovia CEO Robert Steel would not comment about whether or not his firm had an exclusive deal to sell to Citigroup.
John Stumpf, Wells Fargo's chief executive, expressed his confidence that the deal had been handled "appropriately" and that he expected it to be consummated with the approval of regulators.
"We think that this deal is solid," Stumpf said in a joint conference call with Steel.
A copy of the exclusivity agreement between Citigroup and Wachovia obtained by CNNMoney.com revealed that Wachovia had agreed not to seek out another bidder as well as provide information or enter talks that might facilitate a rival bid.
The agreement also indicated that there was no specified break-up fee in the deal.
Still, there were signs that regulators were favoring Monday's Citigroup deal over the Wells-Wachovia merger.
"The FDIC stands behind its previously announced agreement with Citigroup," Federal Deposit Insurance Corporation Chairman Sheila Bair said in a statement, adding that it would pursue a resolution with all three companies.
Both the Federal Reserve and the Office of the Comptroller of the Currency said it was reviewing the proposed deal by Wells Fargo and the issues it raises.
Unlike the Citi deal, the Wells Fargo purchase would require no financial assistance. With the Citi transaction, the FDIC would cover any losses over $42 billion on Wachovia's $300 billion loan portfolio.
Wachovia (WB, Fortune 500) shares soared 74% in midday trading on the news. Shares of Wells Fargo moved off their highs after Citigroup threatened to scuttle the deal, but were still up 5%. Citigroup stock moved 10% lower.
A 'comfortable deal'
Wells Fargo had reportedly walked away from negotiations with Wachovia over the weekend after concerns surfaced regarding parts of Wachovia's loan portfolio, which has been ravaged by the fallout in the housing market in recent months.
Executives at Wells Fargo offered few details about what happened in the days that followed. But they said that their own team of credit experts continued to perform due diligence on previously obtained information about Wachovia's loan portfolio even after Citigroup revealed its own plan to buy Wachovia's banking operations.
After closer inspection, Stump said Wells Fargo finally felt more secure about a tie-up with Wachovia.
"We will not do any deal that we are not comfortable with," Stumpf said. "It took us that amount of time to make sure that was the case."
As of Thursday night, Wachovia's board voted in favor of the Wells Fargo's offer, viewing it as superior to Citi's proposed deal, according to a person familiar with the matter.
"This deal enables us to keep Wachovia intact and preserve the value of an integrated company," Wachovia CEO Robert Steel said in a statement.
The tie-up, however, comes at a cost for the San Francisco-based Wells Fargo. The company said it expected to incur about $10 billion in merger related costs. It said it would also record Wachovia's impaired assets at fair value, which could herald further writedowns.
Howard Atkins, Wells Fargo's chief financial officer, said that pre-tax losses and market adjustments from Wachovia's loan portfolio would hit $74 billion and the bulk of that would be written off shortly after the transaction closes.
At the same time, the company said it expected the acquisition to add to earnings in the first year of operations.
Separately, Wells Fargo said it planned to raise $20 billion, primarily through a common stock sale to help prop up its capital position.
The best suitor?
Unlike many of its peers, Wells Fargo has managed to ride out the credit crunch and turmoil in the housing market without taking a big hit. The company reported better-than-expected earnings for the second quarter in July.
But for months, top executives at Wells Fargo had shunned the notion of doing a large acquisition, instead stressing that they preferred to do a smaller deal, if at all.
It was only recently however, that that stance changed. In mid-September, current Wells Fargo chairman and former CEO Dick Kovacevich said he felt "like a kid in a candy store" given the number of attractive buying opportunities in the banking industry.
Should Wells Fargo succeed in buying Wachovia, it would transform the company, whose operations and bank branches are largely located in the Midwest and on the West Coast, into a dominant presence along the East Coast and in the Southeast. That would put the San Francisco-based bank squarely in competition with the likes of JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500).
Should Wachovia shareholders and regulators approve the deal, Wells Fargo will control about $800 billion in deposits and have nearly 11,000 banking locations.
If Citigroup is not able to prevail over Wells Fargo for Wachovia, it would represent a blow to Citigroup's retail banking aspirations, whose footprint has lagged many of its biggest rivals.
Investors cheered Citigroup's decision earlier this week to buy Wachovia's banking assets. But some observers had wondered whether Citigroup could pull off the deal since it is in the process of a major restructuring after posting close to $18 billion in losses over the past three quarters.
Citigroup CEO Vikram Pandit, however, said on Monday that the purchase was more "compelling" than other deals it had considered, in part, because of Wachovia's geographic exposure.
In the last month alone, the nation's banking industry has undergone a dramatic facelift, including the failure of Washington Mutual and its subsequent purchase by JPMorgan Chase as well as Bank of America's acquisition of Merrill Lynch.
money.cnn.com/2008/10/03/news/companies/wells_fargo_wachovia/index.htm?postversion=2008100312
Wells, Citi square off in Wachovia bid
Hours after Wells Fargo announced plans to buy Wachovia for $15B, Citigroup, which agreed to buy Wachovia bank assets Monday, demands firms terminate deal.
Citi demanded Wells Fargo terminate its proposed deal with Wachovia on Friday, claiming it is 'clear breach' of an exclusivity agreement.
NEW YORK (CNNMoney.com) -- Wachovia and Wells Fargo announced plans to merge Friday, just four days after Citigroup said it would buy Wachovia's banking assets. But Citigroup is not giving up on its plans to buy Wachovia just yet.
Citigroup (C, Fortune 500), which offered $2.2 billion for Wachovia's banking operations Monday, demanded that Wachovia and Wells Fargo terminate the proposed transaction. In a statement, Citigroup said the Wells Fargo merger would break an exclusivity agreement it had with Wachovia.
Unlike the Citigroup-Wachovia deal, Wells Fargo (WFC, Fortune 500) intends to absorb all of Wachovia's assets including its vast deposit network, its massive brokerage business and investment management division.
Wachovia shareholders would receive 0.1991 shares of Wells Fargo common stock in exchange for each share of Wachovia common stock in the transaction, valuing the deal at roughly $7 per Wachovia common share, or approximately $15.1 billion.
In a conference call with investors Friday morning, Wachovia CEO Robert Steel would not comment about whether or not his firm had an exclusive deal to sell to Citigroup.
John Stumpf, Wells Fargo's chief executive, expressed his confidence that the deal had been handled "appropriately" and that he expected it to be consummated with the approval of regulators.
"We think that this deal is solid," Stumpf said in a joint conference call with Steel.
A copy of the exclusivity agreement between Citigroup and Wachovia obtained by CNNMoney.com revealed that Wachovia had agreed not to seek out another bidder as well as provide information or enter talks that might facilitate a rival bid.
The agreement also indicated that there was no specified break-up fee in the deal.
Still, there were signs that regulators were favoring Monday's Citigroup deal over the Wells-Wachovia merger.
"The FDIC stands behind its previously announced agreement with Citigroup," Federal Deposit Insurance Corporation Chairman Sheila Bair said in a statement, adding that it would pursue a resolution with all three companies.
Both the Federal Reserve and the Office of the Comptroller of the Currency said it was reviewing the proposed deal by Wells Fargo and the issues it raises.
Unlike the Citi deal, the Wells Fargo purchase would require no financial assistance. With the Citi transaction, the FDIC would cover any losses over $42 billion on Wachovia's $300 billion loan portfolio.
Wachovia (WB, Fortune 500) shares soared 74% in midday trading on the news. Shares of Wells Fargo moved off their highs after Citigroup threatened to scuttle the deal, but were still up 5%. Citigroup stock moved 10% lower.
A 'comfortable deal'
Wells Fargo had reportedly walked away from negotiations with Wachovia over the weekend after concerns surfaced regarding parts of Wachovia's loan portfolio, which has been ravaged by the fallout in the housing market in recent months.
Executives at Wells Fargo offered few details about what happened in the days that followed. But they said that their own team of credit experts continued to perform due diligence on previously obtained information about Wachovia's loan portfolio even after Citigroup revealed its own plan to buy Wachovia's banking operations.
After closer inspection, Stump said Wells Fargo finally felt more secure about a tie-up with Wachovia.
"We will not do any deal that we are not comfortable with," Stumpf said. "It took us that amount of time to make sure that was the case."
As of Thursday night, Wachovia's board voted in favor of the Wells Fargo's offer, viewing it as superior to Citi's proposed deal, according to a person familiar with the matter.
"This deal enables us to keep Wachovia intact and preserve the value of an integrated company," Wachovia CEO Robert Steel said in a statement.
The tie-up, however, comes at a cost for the San Francisco-based Wells Fargo. The company said it expected to incur about $10 billion in merger related costs. It said it would also record Wachovia's impaired assets at fair value, which could herald further writedowns.
Howard Atkins, Wells Fargo's chief financial officer, said that pre-tax losses and market adjustments from Wachovia's loan portfolio would hit $74 billion and the bulk of that would be written off shortly after the transaction closes.
At the same time, the company said it expected the acquisition to add to earnings in the first year of operations.
Separately, Wells Fargo said it planned to raise $20 billion, primarily through a common stock sale to help prop up its capital position.
The best suitor?
Unlike many of its peers, Wells Fargo has managed to ride out the credit crunch and turmoil in the housing market without taking a big hit. The company reported better-than-expected earnings for the second quarter in July.
But for months, top executives at Wells Fargo had shunned the notion of doing a large acquisition, instead stressing that they preferred to do a smaller deal, if at all.
It was only recently however, that that stance changed. In mid-September, current Wells Fargo chairman and former CEO Dick Kovacevich said he felt "like a kid in a candy store" given the number of attractive buying opportunities in the banking industry.
Should Wells Fargo succeed in buying Wachovia, it would transform the company, whose operations and bank branches are largely located in the Midwest and on the West Coast, into a dominant presence along the East Coast and in the Southeast. That would put the San Francisco-based bank squarely in competition with the likes of JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500).
Should Wachovia shareholders and regulators approve the deal, Wells Fargo will control about $800 billion in deposits and have nearly 11,000 banking locations.
If Citigroup is not able to prevail over Wells Fargo for Wachovia, it would represent a blow to Citigroup's retail banking aspirations, whose footprint has lagged many of its biggest rivals.
Investors cheered Citigroup's decision earlier this week to buy Wachovia's banking assets. But some observers had wondered whether Citigroup could pull off the deal since it is in the process of a major restructuring after posting close to $18 billion in losses over the past three quarters.
Citigroup CEO Vikram Pandit, however, said on Monday that the purchase was more "compelling" than other deals it had considered, in part, because of Wachovia's geographic exposure.
In the last month alone, the nation's banking industry has undergone a dramatic facelift, including the failure of Washington Mutual and its subsequent purchase by JPMorgan Chase as well as Bank of America's acquisition of Merrill Lynch.
