Wells Fargo buys Wachovia

[Marcian]

Originally Posted by Humboldt1

If Citi still takes over WB there will be a lot of bad blood and tons of house cleaning, especially among the executive ranks who sided with WF.

The cleaning will be done regardless who will be getting Wachovia.
NorthJersey.com: Wells Fargo gains ground in tug-of-war for Wachovia

[TexianPatriot]

The only reason Wells swooped in was because they knew the bail out would pass and they are trying to get too big to fail. Although they didn't engage in any subprime lending, they have a ton of housing exposure in California and many people out there feel as though they haven't written down the values accurately. I'd look to get short these guys over the coming weeks if the SEC actually lets the short selling ban expire (given today's tanking market, I think they'll expand the ban throughout the remainder of this week instead of letting it expire on Tuesday as scheduled).

[Kootr]

Citi is said to be suing WB for $60 Billion. Ha, what a joke! Citi is putting the last nails in their own coffin. Watch what happens to Citi - they'll be needing help from the Fed to survive...or they'll end up failing. I suspect they'll be an increased run on deposits at Citi.

[Kootr]

Check this out! The FDIC arranged for WFC to make an offer and endorsed WB to accept it...

"Federal regulators had told Wachovia Corp. the bank would be seized unless it reached a merger agreement with Citigroup Inc. or Wells Fargo & Co. by end of day Friday, Oct. 3, according to a suit filed by Wachovia this weekend in federal court.

The suit seeks to stop Citi from interfering with or slowing the progress of the bank’s merger with Wells, which said Friday it had reached a deal to purchase Wachovia for $15 billion.

The surprise agreement came just days after Wachovia (NYSE:WB) announced it had agreed to sell its banking operations to Citi for $2.16 billion after being pressured by federal regulators, who were concerned about Wachovia’s ability to survive the financial crisis.

Indeed, in its suit against Citi (NYSE:C), Wachovia says that after the Sept. 25 seizure of Washington Mutual Inc. by the Federal Deposit Insurance Corp., Wachovia’s stock came under “downward financial pressure.” And on Friday, Sept. 26, a “silent run” began on Wachovia’s deposits, as borrowers drew down on lines of credit and depositors removed funds from their accounts, the suit states.

The company’s ability to borrow from other banks was also compromised as the price of credit-default swaps — the insurance products that lenders need to cover the risk of lending to Wachovia — began to soar.
That weekend, the bank entered into discussions with Citi and Wells, but Wells backed out on Sunday. The company’s chairman, Dick Kovacevich, told Wachovia CEO Bob Steel that Wells could not make an offer without government assistance and in such a short time frame.

FDIC officials contacted Wachovia executives and said the bank would not be able to open for business on Monday due to its liquidity problems. The FDIC instructed Wachovia to negotiate with Citi, which was the only remaining bidder for Wachovia. On the morning of Monday, Sept. 29, Bob Steel told the company’s board that it had two options: Place Wachovia into bankruptcy or seek a government-assisted deal with Citi and the FDIC. The board voted in favor of seeking a deal.

After announcing the deal, Wachovia was under “tremendous pressure” to complete its merger agreement with Citi, the suit says, because the FDIC had indicated to Wachovia that it would seize the bank unless the merger documents were completed by Monday, Oct. 6.

But the negotiations with Citi proved “extremely complicated and difficult,” Wachovia says in its suit.

In an attached affidavit, Steel says on multiple occasions he and the company’s advisers attempted to persuade Citi to revise its offer and purchase all of Wachovia. Citi refused.

The bank also says in its suit that Citi was insisting on certain terms and conditions that were inconsistent with a nonbinding term sheet the two companies had signed. Some of the changed terms might have affected the viability of the surviving businesses that Citi did not plan to acquire, the suit contends. Citi did not plan to purchase Wachovia Securities, the company’s retail brokerage arm, or Evergreen Investments, its asset-management business.

Then, on Oct. 2, Steel received an unexpected call from FDIC Chairman Sheila Bair. She asked Steel if he had heard from Wells’ Kovacevich, and Steel said no. She then told Steel that the Wells chairman would be calling to propose a $7-per-share acquisition and encouraged the Wachovia CEO to “give serious consideration to that offer.” Steel was on a plane about to take off for Charlotte and asked Bair to contact the company’s general counsel, Jane Sherburne.

Bair then called Sherburne and provided more details on the Wells (NYSE:WFC) deal, acknowledging that it “sounded superior to the Citi proposal,” the suit states. Sherburne told Bair that unless Wachovia had a signed and board-approved offer from Wells, it could not consider the deal. Bair said she would let Kovacevich know. When Steel landed in Charlotte he called Bair to get further details, and Bair informed him the Wells deal would require no government assistance.

At 9 p.m. Thursday, Steel received a call from Kovacevich telling him that he was about to send Steel a signed, board-approved stock-for-stock offer. At 9:04 pm, Steel got an e-mail from Kovacevich with an attached agreement and plan of merger.

Kovacevich also said Wells would announce its own offer publicly if Wachovia did not accept it, according to the suit.

Wachovia’s board met by conference call at 11 p.m. to review the Wells proposal, and Steel and his advisers told the board they believed unless the board signed a definitive deal with Wells or Citi by end of the day Friday, the FDIC was prepared to seize the bank.

The board approved the Wells deal, and after Steel executed the agreement and plan of merger, he and Sherburne called Kovacevich to inform him. Then, Steel, FDIC Chairman Bair and Sherburne called Citi CEO Vikram Pandit to inform him that Wachovia had a deal with Wells.

Since then, Wells has provided “ongoing financial support to Wachovia, allowing Wachovia to remain open,” the suit says.

In its suit, Wachovia argues that the Wells deal is superior because the price is much higher than Citi’s offer of $1 per share for its banking operations. It also says the entire Wells deal is “simpler, easier for shareholders to understand, more likely to close and more likely to receive shareholder approval than the Citigroup offer.”
In addition, the bank says there is an increased risk that the surviving company under the Citi deal would not be viable and might even face bankruptcy.

In its suit, Wachovia says Citi is free to make a better offer, but that Citi’s efforts to undermine the Wells deal “severely damages Wachovia.”

The company also notes that the recently passed $700 billion federal bailout legislation approved on Friday includes language that appears to nullify Citi’s exclusivity agreement.

“We are pleased that Judge (John) Koeltl granted our motion for expedited resolution of the exclusivity agreement between Wachovia and Citigroup,” a Wachovia spokesoman says in a statement. “Wachovia continues to believe its agreement with Wells Fargo, which involves no government assistance, is proper and valid. The agreement is in the best interests of shareholders, employees, creditors and retirees as well as the American taxpayers and it imposes no risk to the FDIC fund.”

Suit: FDIC was ready to seize Wachovia - Los Angeles Business from bizjournals:

[Humboldt1]

It now appears that Wells and Citi will split Wachovia, with Citi getting MidAtlantic and East Coast and Wells getting West and Southeast along with investment divisions and inheriting bad assets.

I wonder if Steele still gets his golden parachute $250MM for he and his buddies. I hope not, especially for how he and Wachovia played Citi.

It now appears that Wells will get 75-80% of Wachovia and Citi the remaining pieces.

I think the FDIC has completely lost credibility with this deal.

[Kootr]

Originally Posted by Humboldt1

It now appears that Wells and Citi will split Wachovia, with Citi getting MidAtlantic and East Coast and Wells getting West and Southeast along with investment divisions and inheriting bad assets.

I wonder if Steele still gets his golden parachute $250MM for he and his buddies. I hope not, especially for how he and Wachovia played Citi.

It now appears that Wells will get 75-80% of Wachovia and Citi the remaining pieces.

I think the FDIC has completely lost credibility with this deal.

You said, "I hope not, especially for how he and Wachovia played Citi." WB CEO Bob Steele didn't "play" Citi, he was told by FDIC Chair Sheila Bair that WFC was making an offer and that he (Steele) needed to seriously consider it, which he did as instructed! Bair is the one that orchestrated the WFC deal. She endorsed the WFC offer and told Steele it was okay for him to take the offer even though he was under an agreement not to negotiate with anyone else with C. Now she's lying about it - says it never happened, and that she was not involved! Bair even contacted WB's general counsel to discuss the WFC deal! But's she still denies it! Steele didn't "play" Citi... You got that all wrong - big time!

You said, "I think the FDIC has completely lost credibility with this deal." I totally agree with you. FDIC Chair Sheila Bair should be behind bars. She's just plain stupid to do what she did. She has caused this whole C & WFC mess.

[Kootr]

Citi chief let rip at Wells and Wachovia

By Francesco Guerrera and Joanna Chung in New York

Published: October 8 2008 00:46 | Last updated: October 8 2008 00:46

For a man often portrayed as a cerebral, professorial type, Vikram Pandit, Citigroup chief executive, showed plenty of fire when he addressed the troops on Monday.

For more than 20 minutes, a tired but feisty Mr Pandit went through the extraordinary few days that landed Citi in a tug-of-war with Wells Fargo over Wachovia.

The impromptu “town hall” meeting, attended by a few hundred employees at Citi’s New York headquarters and re-broadcast to thousands more over its intranet, showed a different side to Mr Pandit.

Under pressure to respond to Wells’s surprise counterbid for Wachovia, which came two days after Citi agreed to buy most of the sixth-largest US lender, and facing criticism that his bank’s failure to close the deal allowed its rival back in, Mr Pandit came out swinging.

In a speech that received a standing ovation, Mr Pandit took the moral high ground, castigating Wachovia for abandoning Citi’s deal and Wells for swooping in after walking away from previous talks.

In his view, Citi was the only institution that answered the regulatory call to save Wachovia when the bank was teetering on the edge.

“We kept the system going, we kept Wachovia alive,” Mr Pandit, dressed in a dark pin-striped suit, white shirt and striped tie, said, according to people who attended the meeting.

“The alternative was not a better bid because the other people had walked away,” he said.

“We need to be paid for that as a company,” he added, reminding the audience that Citi was suing Wells and Wachovia for up to $60bn in damages.

Wells declined to comment and Wachovia said its agreement with Wells was “proper and valid”.

Mr Pandit, who barely looked at his notes during his talk, expressed disbelief that Robert Steel, Wachovia’s chief executive, whom he has known for two decades, opted to back Wells’s $15.1bn all-stock offer for the whole of the bank.

He said that, a day before the Wells bid, Citi had increased the value of its $2.2bn offer for Wachovia’s banking operations to the point that it was “equivalent” to Wells’s bid.

He declined to give details of the improved offer.

Mr Pandit argued that Citi had a strong legal case if talks over a compromise carve-out of Wachovia with Wells failed by the deadline of midday today.

He said Wells’s actions were equivalent to someone “stealing” a winning lottery ticket and said the San Francisco-based bank had “walked away from all [of its] responsibilities” last weekend.

A red-eyed Mr Pandit, who joked that when he received an early-morning call from Mr Steel he thought he had taken the bank’s slogan “Citi never sleeps” a little too literally, reserved some harsh words for regulators.

Noting that Sheila Bair, the chairman of the Federal Deposit Insurance Corporation, the regulator that had backed Citi’s deal, was on the phone with Mr Steel when they told Mr Pandit of Wells’s bid, he said: “I have no idea what Sheila Bair was doing on the phone.”

The FDIC declined to comment on particular calls.

It said: “The FDIC was and has been kept apprised of developments throughout the process. Neither chairman Bair nor any person at the FDIC in any way initiated or solicited the bid from Wells Fargo.”

[Kootr]

Even C's CEO Pandit admits FDIC's Sheila Bair was on the phone with WB's CEO Bob Steele. Yet she denies any involvement!!! Can you believe FDIC Chair Sheila Bair was also on the phone with WB's Bob Steele when he called C's Pandit at 2:00 AM to tell him WB had accepted a better offer from WFC? Sheila Bair stepped way out of her responsibilities with this WB - C/WFC deal.

If I was WFC (who is being sued for $60B by C) I would counter-sue WFC for $120B, and also sue the Federal Government's FDIC for $300B and name FDIC Chair woman Sheila Bair as the main participant in my plaintiff suit. She is just plain stupid.