Citigroup, Wells Fargo are working on ‘grand solution’
An agreement suspending federal litigation over the fate of Wachovia Corp. was extended until Friday after a lawyer said a "grand solution" between bidders Citigroup Inc. and Wells Fargo & Co. was being negotiated.
"There are negotiations between Wells Fargo and Citigroup about a possible grand solution that would preserve the shareholder value for Wachovia as represented by the Wells Fargo deal," said Wachovia lawyer David Boies, according to the transcript. Such a deal "would involve not a single choice between Citigroup and Wells Fargo," he added, without elaborating.
Wells Fargo and Citigroup are competing for control of Charlotte, N.C.-based Wachovia’s $448 billion of deposits in 21 states. Citigroup offered $2.16 billion for the banking operations. Wells Fargo’s later bid, originally valued at $15 billion, was for the whole company, an offer Wachovia prefers to consummate. The bank seeks an order that the deal is valid.
The banks began filing lawsuits against one another last week. Citigroup claims that Wachovia entered into an exclusive negotiating agreement when the Federal Deposit Insurance Corp. on Sept. 29 brokered a deal for Citi to buy Wachovia’s banking operation. Wachovia filed its own lawsuit asking a federal court to block Citigroup’s lawsuit, which was filed in New York state court.
The parties on Monday agreed to suspend their legal actions until Wednesday.
U.S. District Judge Lewis Kaplan in Manhattan Wednesday agreed to extend the delay until Friday, canceling a hearing scheduled for that afternoon, after Citigroup and Wells Fargo made their requests for more time to reach a settlement instant faxless payday loans.
New York-based Citigroup and San Francisco-based Wells Fargo are continuing their talks with the Federal Reserve to resolve the dispute, the banks said.
Wells Fargo may buy Wachovia and sell parts to Citigroup, said a person briefed on the negotiations who declined to be identified because the talks are private. Citigroup would get branches in the Northeast and about a quarter of Wachovia’s deposits. Wells Fargo would take the branches in the South and Mid-Atlantic states, the person said.
The fate of Wachovia’s securities brokerage operation, which is based in St. Louis, was not discussed. But under the original Citigroup deal, Wachovia Securities would have remained part of Wachovia Corp. along with Wachovia’s Evergreen mutual fund operation. Wells Fargo’s deal would have included, all of Wachovia’s operations, including the securities brokerage, which employs about 4,800 people in St. Louis.
Wachovia has a limited role in the talks, Wachovia General Counsel Jane Sherburne said.
Wachovia is "unfortunately somewhat caught in the middle of this negotiation between Wells and Citigroup," she told Kaplan, adding that her bank "will facilitate in whatever way we can a negotiated settlement of this matter."
Sherburne warned Kaplan that a settlement of the dispute must be reached soon.
"The further this litigation proceeds," she said, "the more difficult it becomes to sustain a negotiated settlement posture between the other two parties."