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WORLD> America
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Wells Fargo acquiring Wachovia for $15.1 billion
(Agencies)
Updated: 2008-10-03 19:47 NEW YORK - In an abrupt change of course, Wachovia said Friday it agreed to be acquired by San Francisco-based Wells Fargo & Co. in a $15.1 billion all-stock deal, trumping rival suitor Citigroup's plan to acquire Wachovia's banking operations.
A key difference is that the Wachovia deal will be done without government assistance, while the Citigroup deal would have been done with the help of the Federal Deposit Insurance Corp. "This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support," Robert Steel, Wachovia's president and chief executive, said in a statement. The Wachovia-Wells deal, announced Friday, comes in a turbulent time for banks and financial firms as they grapple with the ongoing credit crisis, which led to the recent bankruptcy of Lehman Brothers Holdings Inc. and the failure of Washington Mutual Inc.
Wachovia Corp. shareholders will receive 0.1991 shares of Wells Fargo for every share of Charlotte, N.C.-based Wachovia stock they own, valuing Wachovia at about $7 per share. This is a nearly 80 percent premium over the stock's Thursday closing price of $3.91. Shares closed at $10 last Friday, the last trading session before the deal with Citigroup Inc. was announced. The board approved Wells Fargo's offer late Thursday. The deal is still subject to Wachovia shareholder and other regulatory approvals. Wells Fargo said it expects the deal to close by year-end. "It provides superior value compared to the previous offer to acquire only the banking operations of the company and because Wachovia shareholders will have a meaningful opportunity to participate in the growth and success of a combined Wachovia-Wells Fargo that will be one of the world's great financial services companies," said Wells Fargo Chairman Dick Kovacevich. Wells Fargo will record merger and integration charges of about $10 billion, but says it expects earnings to be boosted within the first year after the acquisition closes. No government assistance is part of the deal terms. Wells Fargo said it will record Wachovia's credit-impaired assets at fair value, but provided no estimate of what that would be. In its planned takeover of Wachovia, Citigroup said it would write down those assets by $30 billion at the close of the transaction and be responsible for the next $12 billion in losses over a period of three years. If the total exceeded that, the FDIC would cover the difference. Additionally, Wells Fargo plans to issue up to $20 billion of stock, primarily common stock, to maintain a strong capital position. |
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