News
Email
Print
Citigroup walks away from compromise over Wachovia
AP photo
ADVERTISEMENT
Published: October 9, 2008
Updated: 10/09/2008 06:46 pm
Citigroup Inc. said Thursday it has slammed the door on any compromise with Wells Fargo & Co. over Wachovia Corp.'s operations and will resume its bid for the bank in court.
However, Citigroup also said it would not to try legal maneuvers to prevent the Wells Fargo deal for Wachovia from going forward.
The bank had attempted such a legal move last weekend in New York, only to be blocked by a ruling from the Appellate Division of State Supreme Court.
Wachovia responded to the Citigroup statement by saying "we look forward to completing our merger with Wells Fargo."
"We have always believed (it) is in the best interest of shareholders, employees, creditors and retirees, as well as the American taxpayers and it imposes no risk to the FDIC fund," according to the Wachovia statement. "Our board made the right fiduciary decision for all of our constituents."
The next legal steps could be held Friday in U.S. District Court in Manhattan and a civil case Tuesday in New York state court.
The banks had agreed Wednesday to extend their legal cease-fire until 8 a.m. Friday at the insistence of the Federal Reserve.
Citigroup said in a statement that it was clear after four days of talks with Wells Fargo that no agreement could be reached.
"The dramatic differences in the parties' transaction structures, and their views of the risks involved, made it impossible to reach a mutually acceptable agreement," Citigroup said.
"Citi believes that it has strong legal claims against Wachovia, Wells Fargo and their officers, directors, advisors and others for breach of contract and for tortious interference with contract.
"Citigroup plans to pursue these damage claims vigorously on behalf of its shareholders."
Analysts had said the most likely compromise would have been Citigroup getting Wachovia's branches in the Northeast and potentially in the mid-Atlantic markets, and Wells Fargo getting the remaining branches and Wachovia Securities and Evergreen Asset Management.
"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 the interests of our shareholders," Citigroup said.
Analysts said that the Federal Reserve has been pressing Citigroup and Wells Fargo to negotiate a deal in which they split Wachovia's assets, particularly its branches, to avoid a long legal fight that could threaten Wachovia with insolvency.
Wells Fargo wants to buy all of Wachovia for an offer initally worth $15.1 billion, or $7 a share.
Citigroup wants just the banking operations for $2.2 billion, or $1 a share, and $95 billion in assumed debt and loan losses.
That offer would leave Wachovia with its Wachovia Securities and Evergreen Asset Management subsidiaries as a smaller publicly traded company.
Wachovia shareholders have expressed support for a Wells Fargo deal, with nearly 40 percent of its preferred sales committed to the deal last Friday.
Email
Print
