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Wells Fargo will buy rival bank Wachovia

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User ID: 506859
United States
10/03/2008 08:50 AM
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Wells Fargo will buy rival bank Wachovia
Transaction worth about $15.1 billion; talks with Citigroup end

SAN FRANCISCO - In an abrupt change of course, Wachovia Corp. said Friday it will be acquired by Wells Fargo & Co. in a $15.1 billion all-stock deal, wiping out Wachovia’s previous plan to sell its banking operations to rival suitor Citigroup Inc.

A key difference is that the Wachovia deal will be done without government assistance, while the Citigroup deal would have been done with the help of the Federal Deposit Insurance Corp.

The Wachovia-Wells deal, announced Friday, comes in a turbulent time for banks and financial firms as they grapple with the ongoing credit crisis, which led to the recent bankruptcy of Lehman Brothers Holdings Inc. and the failure of Washington Mutual Inc.

Wachovia shareholders will receive 0.1991 shares of Wells Fargo for every share of Charlotte, N.C.-based Wachovia stock they own, valuing Wachovia at about $7 per share. This is a nearly 80 percent premium over the stock’s Thursday closing price of $3.91. Shares closed at $10 last Friday, the last trading session before the deal with Citigroup was announced.

On Monday, Citigroup had agreed to buy Wachovia’s banking operations for $2.16 billion in a deal orchestrated by the federal government.

That deal, which had been approved by the boards of both companies, was still subject to approval by Wachovia’s shareholders and regulators.

San Francisco-based Wells Fargo will record merger and integration charges of about $10 billion, but says it expects earnings to be boosted within the first year after the acquisition closes. No government assistance is part of the deal terms.

A Wachovia spokeswoman said neither Citigroup nor the FDIC is involved in the Wells Fargo transaction. Citigroup officials did not immediately return calls for comment.

“This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support,” said Wachovia President and Chief Executive Robert Steel.

Wachovia’s board approved Wells Fargo’s offer Thursday night.

[link to www.msnbc.msn.com]