Evergreen Investments will be in the hands of Wells Fargo before the year closes. Thursday, Citigroup abandoned compromise talks with Wells Fargo over Wachovia, paving the way for Wells' acquisition of all of Wachovia to move forward. Citi still plans to press ahead with its suit against Wells Fargo and Wachovia, but will not ask that the Wells-Wachovia merger be enjoined.
"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 Citi statement read.
Citi Press Release
New York – Citi announced today that it had reached no agreement with Wells Fargo following several days of discussions about matters related to Wachovia. The dramatic differences in the parties' transaction structures and their views of the risks involved made it impossible to reach a mutually acceptable agreement.
Citi said: "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."
Citi's transaction, which it remains willing to complete, protected Wachovia's holding company debt and its subsidiary banks, while limiting the risk to Citigroup and generating value for its shareholders. The transaction also preserved substantial value for Wachovia's shareholders and other holding company stakeholders without exposing Citigroup to Wachovia holding company liabilities it declined to assume. Finally, Citigroup agreed to pay $12 billion to the FDIC, and to incur up to $42 billion of losses, in exchange for the contingent loss protection the FDIC agreed to provide.
Citi 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 and for tortious interference with 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.
Citi CEO Vikram Pandit said: "We did not seek the Wachovia transaction; Wachovia brought it to us. Our focus remains on capitalizing on our global strengths. We will continue to apply the same discipline we employed in this and other recent transactions to future acquisition opportunities. 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.
"There has been strong affirmation of Citi's global universal banking model. Citi has a large and diversified deposit base, a strong capital ratio, solid liquidity and tremendous assets. This strength, as well as the company's commitment to managing risk, has made Citi a favored counterparty during this period," Mr. Pandit said.
Wells Fargo Press Release
SAN FRANCISCO, October 9, 2008 – Wells Fargo & Company (NYSE: WFC) said today that it and Citigroup, Inc. (NYSE: C) have terminated discussions concerning a possible sale of certain banking assets of Wachovia Corporation (NYSE: C) and reaffirmed that it is proceeding with its merger with Wachovia Corporation (NYSE:WB) as a whole company transaction with all of Wachovia’s banking and other operations, requiring no financial assistance from the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
Wells Fargo has submitted its application to the Federal Reserve Board seeking expedited approval of the merger and the share exchange agreement previously entered into between Wachovia and Wells Fargo. Under the share exchange agreement, Wachovia is issuing Wells Fargo preferred stock that votes as a single class with Wachovia’s common stock representing 39.9 percent of Wachovia's voting power. The acquisition of the non-banking related operations of Wachovia and the share exchange agreement have received early termination from the Federal Trade Commission (FTC), under the Hart-Scott-Rodino Act.
As previously announced, under the definitive agreement between the two companies, Wells Fargo will acquire all outstanding shares of common stock of Wachovia in a stock-for-stock transaction. 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 Chairman Dick Kovacevich said the merger is "simply an incredible fit that will result in an immensely strong, stable financial services company that will carry on Wachovia's proud tradition of being one of the very best financial institutions in the world. We're combining the industry's number one ranking customer service culture of Wachovia with the industry's number one sales and cross-selling culture of Wells Fargo. The best in service and the best in sales, an unbeatable combination. We also bring to this merger our 157 years of experience in financial services and the unparalleled convenience we can offer Wachovia customers through one of the most extensive financial services distributions systems in North America. We have the highest regard for the quality and commitment and caring of Wachovia team members. We believe their demonstrated commitment to outstanding customer service and their highest standards of community leadership are identical to our own values."
Kovacevich reiterated that the two companies have a firm, binding merger agreement, are confident the merger will be completed, that it will keep Wachovia intact and create significant value for Wachovia and Wells Fargo shareholders. Wells Fargo will record Wachovia's credit-impaired assets at fair value. "Credit teams at Wells Fargo have had an opportunity to work with their counterparts at Wachovia," said Kovacevich. "Much of Wachovia's portfolio involves businesses where Wells Fargo has a significant market presence, operating history and expertise. We have had experience with such businesses through a variety of credit cycles. Given our broad based operating expertise, and specific understanding of these individual businesses we believe we have adequately evaluated the risks inherent in the portfolios as of the time of this merger agreement."
In addition, Kovacevich said Wells Fargo is pleased that Citigroup announced that it is no longer seeking that the Wells Fargo-Wachovia Merger be enjoined. "We believe that that is the correct and right decision for our Country and our citizens and the health of our already stressed financial system, as well as our and Wachovia's respective shareholders and stakeholders," said Kovacevich.
"We are delighted to stride ahead with Wells Fargo in creating a coast-to-coast financial institution — one of the strongest financial firms in the world," said Wachovia Corporation President and CEO Robert K. Steel.
The combined company will have $1.42 trillion in assets, $787 billion in deposits, 48 million customers, $258 billion assets under management in mutual funds, 10, 761 stores, 12,227 ATMs and 280,000 team members. The merger will create the nation’s premier coast-to-coast community banking presence with community banks in 39 states and the District of Columbia.
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