This would-be acquisition is turning into a mess. First Citi agreed to buy Wachovia’s deposits with the help of the FDIC. Wachovia accepted this deal under duress, apparently. The FDIC warned Wachovia that if they did not agree to the deal, the government would seize Wachovia’s deposits. That left Wachovia little choice but to accept.
Not much later, Wells Fargo stepped in with a better offer for Wachovia. This offer called for an acquisition of the entire operations of Wachovia, not just deposits, without the help of the government, for $15.1 billion in stock.
On Saturday, the FDIC succeeded in having the New York State Supreme Court block the deal between Wells Fargo and Wachovia, but on Sunday night, the ruling was overturned on appeal. Citi will appeal this decision.
It seems that the Wells Fargo deal is better for Wachovia, Wachovia’s shareholders, and the public. Wells Fargo will keep Wachovia intact and the FDIC will not be required to use taxpayer money to cover any losses. I don’t see any reason that anyone would favor the Citi deal.
Published or updated October 5, 2008.