Citigroup (C) announced Thursday that it was walking away from its attempts to buy Wachovia’s (WB) banking operations, handing victory to Wells Fargo (WFC).
New York-based Citi stated that after following several days of discussions about matters related to Wachovia – dramatic differences in transaction structures and views of risks made mutually acceptable agreements impossible.
Citigroup agreed last week to buy Wachovia’s banking operations with partial government assistance for $2.2 billion. But, in an abrupt change of course, Wachovia announced few days later that it had agreed to be acquired by Wells Fargo & Co. in a $15.1 billion deal which included Wachovia’s asset management and retail brokerage arms, thus wiping out Wachovia’s previous plan to sell its banking operations to rival Citigroup.
Wells and Citi fought in court last weekend, but on Monday agreed to suspend litigation and extended their legal standstill in their fight for Wachovia until Friday morning giving them more time to work toward a mutual agreement, which apparently ended in Wells Fargos favor.
Fed officials kept monitoring the negotiations closely, worried that a prolonged fight for Wachovia could unnerve investors and customers.
Wells Fargo will now gain control of a bank with more than $440 billion of deposits in 21 states. It would be the biggest U.S. bank by number of retail locations, with 6,675 branches, compared with Bank of America (BAC) 6,139.
Citi in a statement said:
Without our willingness to engage in this transaction, hundreds of billions of dollars of value would have been seriously threatened. We stood by Wachovia while others walked away. Now, our shareholders have been unjustly and illegally deprived of the opportunity the transaction created.
“We did not seek the Wachovia transaction”; Chief Executive Vikram Pandit said, “Wachovia brought it to us.” Citi will continue to seek compensatory and punitive damages for bad faith breach of contract and tortious interference.
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