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Citi walks out of Wachovia deal

Source: PTI
October 10, 2008 14:30 IST
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Global financial giant Citigroup on Friday said it has decided to walk away from a deal entailing acquisition of Wachovia, paving way for rival Wells Fargo to acquire the troubled American bank for about $15 billion.

"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 interests of our shareholders," Citigroup said in a statement.

No agreement has been reached with Wells Fargo following several days of discussions about matters relating Wachovia, Citigroup said adding that the dramatic differences in the parties' transaction structures and their views of the risks involved made it impossible to reach a mutually acceptable agreement.

The battle between financial giants Citigroup and Wells Fargo began after Wachovia dumped the $2.2 billion deal with Citi in favour of a better offer from Wells Fagro.

Earlier on September 29, regulator FDIC has facilitated Citigroup's acquiring banking operations of Wachovia.

However on October 3, Wachovia had announced a new deal entailing its merger with rival Wells Fargo in an all- stock transaction worth about $15.1 billion.

Meanwhile in a statement, the Federal Reserve on Friday said it will immediately begin consideration of the filings submitted by Wells Fargo for approval to acquire Wachovia.

The Fed has acknowledged efforts of Citi Group and Wells Fargo to reach an accord regarding Wachovia acquisition. While no agreement between Wells Fargo and Citi was reached, the two parties have indicated that they will no longer seek injunctive relief to prevent a transaction.

"We did not seek the Wachovia transaction; Wachovia brought it to us. Our focus remains on capitalising on our global strengths. We will continue to apply the same discipline we employed in this and other recent transactions to future acquisition opportunities," Citigroup CEO Vikram Pandit said.

Citigroup further said without our willingness to engage in this transaction, hundreds of billions of dollars of value would have been seriously threatened. We stood by while others walked away. Now, our shareholders have been unjustly and illegally deprived of the opportunity the transaction created.

Citi believes that it has strong legal claims against Wachovia, Wells Fargo and their officers, directors, advisors and others for breach of contract.

"Citigroup plans to pursue these damage claims vigorously on behalf of its shareholders. However, Citigroup has decided not to ask that the Wells Fargo-Wachovia merger be enjoined," the statement said.

"We will redouble the focus on our five core businesses and continue to demonstrate strong capital and risk management supported by continuously improving expense control. We are committed to affirming Citi's position as a leading global financial institution," Pandit added.

Wachovia's board approved Wells Fargo's offer on October 2. Citigroup had then said, "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."

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