From the Wall Street Journal:
A deal between Citigroup Inc. and Wells Fargo & Co. to give both banks part of Wachovia Corp. fell apart Thursday, but Citi said it wouldn’t try to block merger between the other two.
Wachovia shares jumped 15% to $4.13 in late trading, as Citi climbed 1.2% to $13.09 and Wells Fargo fell 2.8% to $26.50.
Citi, which said it remains willing to complete the transaction, said it plans to pursue its legal claims against Wachovia and Wells Fargo for breach of contract and for tortious interference with the contract. (Citi’s statement)
Citi said the “dramatic differences in the parties’ transaction structures and their views of the risks involved made it impossible to reach a mutually acceptable agreement.”
The cynic in me wonders if Citi entered into negotiations in good faith, or whether they were going through the motions so as to improve their case before a judge (judges look dimly upon litigants who do not try to solve their dispute first). But I have no evidence to support that view.
Another report comes via StreetInsider (hat tip reader Megan). Note that this is a Citi-friendly account:
Citi announced today that it had reached no agreement with Wells Fargo following several days of discussions about matters related to Wachovia. The dramatic differences in the parties’ transaction structures and their views of the risks involved made it impossible to reach a mutually acceptable agreement….
Citi’s transaction, which it remains willing to complete, protected Wachovia’s holding company debt and its subsidiary banks, while limiting the risk to Citigroup and generating value for its shareholders. The transaction also preserved substantial value for Wachovia’s shareholders and other holding company stakeholders without exposing Citigroup to Wachovia holding company liabilities it declined to assume. Finally, Citigroup agreed to pay $12 billion to the FDIC, and to incur up to $42 billion of losses, in exchange for the contingent loss protection the FDIC agreed to provide.
Citi said: “Without our willingness to engage in this transaction, hundreds of billions of dollars of value would have been seriously threatened. We stood by while others walked away. Now, our shareholders have been unjustly and illegally deprived of the opportunity the transaction created.”
Citi believes that it has strong legal claims against Wachovia, Wells Fargo and their officers, directors, advisors and others for breach of contract and for tortious interference with contract. Citigroup plans to pursue these damage claims vigorously on behalf of its shareholders.
However, Citigroup has decided not to ask that the Wells Fargo-Wachovia merger be enjoined.