Citi wins court order in battle for Wachovia
Monday, 6 October 2008
NEW YORK, Oct 5 (Reuters): Citigroup Inc said it won a court order late Saturday blocking Wells Fargo & Company from buying hobbled US bank Wachovia Corp until the court rules otherwise.
Citigroup, which planned to buy Wachovia's banking assets for $2.2 billion, said New York State Supreme Court Justice Charles Ramos granted an injunction extending Wachovia's agreement to negotiate exclusively with Citigroup.
Citigroup and Wells Fargo are battling for control of sixth-largest US bank Wachovia, which has been hit hard by bad mortgages amid turmoil in global credit markets, but has a large network of branches.
Citigroup, the largest US bank, announced Monday it had agreed to buy Wachovia's banking operations in a deal backed by the US government. That deal did not include a signed merger agreement, but Wachovia did sign an agreement to only negotiate with Citigroup through Monday October 6.
On Friday, however, Wells Fargo said it had signed an agreement to buy the whole of Wachovia, including its asset management unit and retail brokerage, for about $15 billion, roughly seven times more.
Wachovia said early Sunday morning that it believes its agreement with Wells Fargo is valid and proper, and is best for shareholders, employees and US taxpayers.
"Citigroup is always free to make a superior offer to Wachovia," spokeswoman Christy Phillips-Brown said.
Citigroup said in its statement that it is prepared to continue negotiating with Wachovia, but that Wachovia may not speak to others.
Some lawyers believe that Citigroup could have a real case, noting the exclusivity agreement and the fact that Citigroup provided financial support to Wachovia last week.
"Those are clearly strong facts on Citi's side," said Morton Pierce, chairman of the mergers and acquisition group at law firm Dewey & LeBoeuf, Friday. Dewey & LeBoeuf is not representing any of the parties in the transaction.
Citigroup, which has sustained about US$60 billion of writedowns and losses during the credit crunch, planned to buy Wachovia's banking assets with US help, including partial government guarantees on a $312 billion Wachovia loan book.
The deal is important for Citigroup Chief Executive Vikram Pandit, who is looking to turn around the ailing bank in part by focusing on stable businesses such as consumer banking.
Wells Fargo, the seventh largest US bank by assets, has managed to remain consistently profitable during the credit crunch. Its bid would not require government backing.
Citigroup, which planned to buy Wachovia's banking assets for $2.2 billion, said New York State Supreme Court Justice Charles Ramos granted an injunction extending Wachovia's agreement to negotiate exclusively with Citigroup.
Citigroup and Wells Fargo are battling for control of sixth-largest US bank Wachovia, which has been hit hard by bad mortgages amid turmoil in global credit markets, but has a large network of branches.
Citigroup, the largest US bank, announced Monday it had agreed to buy Wachovia's banking operations in a deal backed by the US government. That deal did not include a signed merger agreement, but Wachovia did sign an agreement to only negotiate with Citigroup through Monday October 6.
On Friday, however, Wells Fargo said it had signed an agreement to buy the whole of Wachovia, including its asset management unit and retail brokerage, for about $15 billion, roughly seven times more.
Wachovia said early Sunday morning that it believes its agreement with Wells Fargo is valid and proper, and is best for shareholders, employees and US taxpayers.
"Citigroup is always free to make a superior offer to Wachovia," spokeswoman Christy Phillips-Brown said.
Citigroup said in its statement that it is prepared to continue negotiating with Wachovia, but that Wachovia may not speak to others.
Some lawyers believe that Citigroup could have a real case, noting the exclusivity agreement and the fact that Citigroup provided financial support to Wachovia last week.
"Those are clearly strong facts on Citi's side," said Morton Pierce, chairman of the mergers and acquisition group at law firm Dewey & LeBoeuf, Friday. Dewey & LeBoeuf is not representing any of the parties in the transaction.
Citigroup, which has sustained about US$60 billion of writedowns and losses during the credit crunch, planned to buy Wachovia's banking assets with US help, including partial government guarantees on a $312 billion Wachovia loan book.
The deal is important for Citigroup Chief Executive Vikram Pandit, who is looking to turn around the ailing bank in part by focusing on stable businesses such as consumer banking.
Wells Fargo, the seventh largest US bank by assets, has managed to remain consistently profitable during the credit crunch. Its bid would not require government backing.