Since Wachovia purchased SouthTrust Bank, many Alabama citizens are very much aware of what has happened to Wachovia since that time. In fact, many Alabamians have a shareholder interest in Wachovia, and others are concerned because their money is deposited in some manner in the North Carolina-based bank. This concerns both individuals and businesses. When Wachovia’s severe financial problems began to be exposed, these Alabamians became very uneasy and greatly concerned. The bank quickly became a take-over candidate.
Citigroup and Wells Fargo have been “fighting over” Wachovia, resulting in Citigroup filing a civil lawsuit in New York Supreme Court against Wachovia, Wells Fargo and the directors of both companies, seeking more than $60 billion in damages. The basis for the suit is a claim that Wells Fargo interfered with Citigroup’s planned takeover of Wachovia’s banking operations. The complaint seeks more than $20 billion in compensatory damages and more than $40 billion in punitive damages from Wells Fargo for tortious interference. Citigroup also seeks relief from Wachovia for its bad faith breach of the bank’s contract. Citigroup and Wachovia are involved in a separate case in federal court.
The Federal Reserve tried to work things out between Wells Fargo and Citigroup, but that effort failed. It’s pretty hard to understand how Citigroup could have prevailed in a bidding war since its offer to purchase Wachovia was grossly inadequate compared to Wells Fargo’s offer, which is 15 times better. But apparently, Citigroup and Wachovia already had a valid agreement when Wells Fargo entered the bidding.
Citigroup ended its negotiations with Wells Fargo in its fight to acquire Wachovia. Citigroup believes it has strong legal claims against Wachovia and Wells Fargo for breach of contract and says it plans to pursue its claims vigorously. Citigroup agreed to buy Wachovia’s banking operations for $2.1 billion in a deal orchestrated by the government. Four days later, Wells Fargo stunned Citigroup by announcing that Wachovia’s board had agreed to an $11.7 billion all-stock offer. Originally, the deal was valued at $15.1 billion, but Wells Fargo stock declined since it was announced.
The Federal Reserve has now approved the Wells Fargo purchase of Wachovia. In an interesting move, Wells Fargo is asking a federal court in New York to void Citigroup’s damages. It is asking the court to help it in that regard by ruling that the agreement between Citigroup and Wachovia was against public policy, and thus invalid. That’s a pretty slick move and it will be interesting to see if it works.
Source: Forbes, Associated Press and The Birmingham News
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