RALEIGH, N.C. – Friday, Oct. 3 will long be remembered from Wall Street to Tryon Street in Charlotte and downtown Raleigh where a big “Wachovia” sign adorns one of the city’s three gleaming towers. Just when the bride (Wachovia) seems set to change names in marriage, another suitor sweeps in – and the spurned groom threatens to go to court.
The tower letters were soon to spell Citi as in Citi bank – so most people believed Monday after Wachovia came close to failure just a week ago. Citi stepped in for a shotgun wedding with the support of the bride’s parents (read: federal governmen)t to buy Wachovia’s banking operations.
Fast forward to today. At 7 the sun apparently rose in the west as a new suitor galloped down Tyron Street to elope with the Charlotte-based bank. That Raleigh tower name would change to “Wells Fargo.”
Wachovia and Wells Fargo issued a marriage press announcement about a colossal $15 billion merger that stunned the financial world, Wachovia employees and shareholders – and Citi.
For better or worse, Wells Fargo would take ALL of Wachovia – and without any taxpayer support, as Wachovia CEO Robert Steel noted (“no costs to U.S. taxpayers”) in a conference call.
By 10:34 a.m., Citi cried foul like a spurned suitor at the surprise wedding, saying it had a deal with Wachovia.
Just minutes earlier the pledged-to-wed potentates at Wells Fargo (which numbers billionaire Warren Buffett among its biggest shareholders) and Wachovia wrapped the call with financial analysts in which they hailed the all-but-done marriage. Only the rings needed to be exchanged.
However, they were told toward the end of the call that Citi would fight the deal.
Wells Fargo Chief Executive Officer John Stumpf seemed, well, stumped. The banks were “not aware” of any “constrictions,” he said. “We feel totally confident this transaction was done very appropriately, will be consummated and will go forward.” He insisted that federal regulators were “very comfortable” with the deal.
Wachovia’s Steel added that “the controversy on this issue will be addressed in the appropriate way.”
However, the Federal Reserve issued a statement that indicated Wells Fargo and Wachovia would not be allowed to elope:
“A new proposal to acquire Wachovia has emerged from Wells Fargo. The Citigroup proposal has undergone extensive review by the Federal Reserve and the Office of the Comptroller of the Currency. We have not yet reviewed the new Wells Fargo proposal and the issues that it raises. The regulators will be working with the parties to achieve an outcome that protects all Wachovia creditors, including depositors, insured and uninsured, and promotes market stability.”
Then came Citi’s brief but scathing objection to the Wells Fargo-Wachovia marriage vows.
“Wachovia’s agreement to a transaction with Wells Fargo is in clear breach of an Exclusivity Agreement between Citi and Wachovia. In addition, Wells Fargo’s conduct constitutes tortious interference with the Exclusivity Agreement,” Citi said.
“The Exclusivity Agreement provides, among other things, that Wachovia will not enter into any transaction with any party other than Citi, and will not participate in any discussions or negotiations with any third party. …
“Citi was negotiating in good faith and nearly completed the definitive agreements required to consummate the Citi/Wachovia transaction that was announced on Monday. … Citi has also been providing liquidity support to Wachovia Bank since Monday’s announcement.
“Citi has demanded that Wachovia and Wells Fargo terminate and not proceed with any proposed transaction, any conduct in furtherance thereof, or any other act in violation of the Exclusivity Agreement. Citi has substantial legal rights regarding Wachovia and this transaction.”
The Wall Street-Tyron Street struggle over who weds whom appears headed for the courts. And Wachovia’s name isn’t changing – yet.
I wonder, will the taxpayers end up paying for a Wachovia wedding after all?