Wells Fargo Higher Bid; FDIC Affirms Citi

123jump.com Staff
03 Oct, 2008
New York City

Wells Fargo offered a significantly higher bid for Wachovia Corp and agrees to purchase its banking and other business. The all-stock deal values the bank at $15.1 billion or $7 a share, significantly higher than $2.1 billion or $1 a share offer. FDIC affirmed that the deal with Citigroup stands.

[R]10:55AM New York ? Wells Fargo agrees to buy the banking and asset management operations of Wachovia at $15.1 billion. The FDIC disagrees.[/R]

After the close of the bidding process conducted by the Federal Deposit Insurance Corporation for the transfer of Wachovia Corporation, Wells Fargo proposed the revised bid. The banks of both banks agreed to the new proposed bid from Wells Fargo, but it is not clear what has happened to the merger agreement with Citigroup.

The FDIC in a statement released on its Web site cited, """"""""""""""""""""""""""""""""The FDIC stands behind its previously announced agreement with Citigroup. The FDIC will be reviewing all proposals and working with the primary regulators of all three institutions to pursue a resolution that serves the public interest.""""""""""""""""""""""""""""""""

Wells Fargo Offer

Wachovia agreed to merge with Wells Fargo after it valued the troubled bank significantly higher and kept its asset management and brokerage arms together. The all-stock deal also does not require any assistance from the Federal regulators.

Wells Fargo offer valued the company stock at $7.00 a common share and will exchange 0.1991 of its share. The transaction is based on Wells Fargo stock price at the closing on October 2 of $35.16. The deal values Wachovia at $15.1 billion on 2.2 billion outstanding common shares.

In the transaction, Wells Fargo will acquire all of Wachovia Corporation and all its businesses and obligations, including its preferred equity and indebtedness, and all its banking deposits.

Wells Fargo will record Wachovia? credit assets at the fair value and incur merger and integration charges of $10 billion. The bank will also raise $20 billion to improve its capital base.

After the merger two banks will have 280,000 employees and 12,277 ATM locations. The combined assets will be $1.42 trillion and customer deposits will be $787 billion with 48 million customers in 39 states.

Assets under management will be $258 billion.

In the morning trading Wachovia Bank ((WB)) surged 75% or $3.10 to $7.01 and Wells Fargo (WFC)) rose $3.59 to $38.75. Citigroup Inc ((C)) dropped $2.85 to $19.75.

Citigroup had agreed to pay for banking operations of Wachovia at $2.1 billion and did agree to buy AG Edwards Evergreen mutual funds family. Citigroup had offered $1 a share and limited its loan loss provision to $42 billion with the FIC responsible for additional losses. Citigroup had also planned to raise $10 billion to pay for the transaction.