Wachovia Corp. (NYSE: WB) shares were halted for "NEWS PENDING" because of an announcement coming out of Citigroup (NYSE: C). The Citi and Wells Fargo (NYSE: WFC) war may be heating up above and beyond a normal fight. Shares were down over 7% at $5.73 on the halt and more than 49 million shares have traded hands. The news is that Citi is going to sue Wells Fargo and Wachovia for bad faith and breach of contract. But the amount is almost absurd and you would almost wonder where the math came from. Citi is seeking $60 billion in damages.
We have outlined on more than one occasion how this merger was going toremain an uncertainty for quite some time. In fact we think this willbecome capstone case study material pitting private sector deals upagainst private combined with public sector mergers. We’d call this afluid situation with a definitely unknown outcome.
Vikram Pandit and friends at Citi were going to get to steal Wachovia at the expense of all Wachovia stockholders. Wells Fargo came in with a last hour bid that was large enough to make Wachovia officials go along with a new deal. The deal from Citi was FDIC endorsed, but it also left the government on the hook to share in losses. The Wells Fargo deal does not leave FDIC or tax payers on the hook. At least that is our opinion about it. The Wells Fargo deal is a far better deal for Wachovia’s shareholders. That is what the reactions for the stock have indicated.
The other issue is that many believed in today’s new world financial conglomerates that Wachovia after teh Citi bank assets purchase was going to have to take its Evergreen and A.G.Edwards units and go buy a commecrial depository banking institution. That would be an odd and sick twist of fate for a company which already has one of those.
These are strange times indeed. Unfortunately, the answer of who is wrong and who is right here is rather complicated: They are both right, and they are both wrong.
The kitchen is starting to smell like old fish, possum, and something else. Stay tuned.
Jon C. Ogg
October 6, 2008