The largest bank on the US West Coast and the second largst US mortgae originator and sevicer, Wells Fargo & Co, has edged out Citigroup to buy Wachovia Corp in an all-stock deal valued at about $15.1 billion, four days after Citi said it would buying certain businesses of the North Carolina-based Wachovia (See: Citi to acquire Wachovia assets in a US government-backed rescue) 

Wells Fargo will acquire all of Wachovia's banking operations in a whole-company transaction including all its obligations and keep the stricken bank intact.

Wells Fargo said it did not require any financial assistance from the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

Under terms of the agreement, which has been approved unanimously by the boards of both companies, Wachovia shareholders will receive 0.1991 shares of Wells Fargo
common stock in exchange for each share of Wachovia common stock. The transaction, based on Wells Fargo's closing stock price of $35.16 on 2 October 2008, is valued at $7.00 per Wachovia common share for a total transaction value of approximately $15.1 billion.

The acquisition is expected to exceed Wells Fargo's targeted internal rate of return and add to Wells Fargo's earnings per share in the first year of operations, excluding integration costs, writedowns, transaction charges, and credit reserve build. Wells Fargo expects to incur merger and integration charges of approximately $10 billion. To maintain its strong capital position, Wells Fargo intends to issue up to $20 billion of new Wells Fargo securities, primarily common stock.

''Today's announcement creates one of the strongest financial firms in the world and is great for all Wachovia constituencies: our shareholders, customers, colleagues and communities, " said Robert K. Steel, president and CEO of Wachovia Corp.

Steel said, "This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support.''

According to Wells Fargo Chairman Dick Kovacevich.''We are combining the industry's number one ranking customer service culture of Wachovia with the industry's number one sales and cross-selling culture of Wells Fargo. The best in service and the best in sales, an unbeatable combination.

"Wachovia's brokerage and asset  management businesses, which would have been left behind in the prior proposal, are tightly interwoven with Wachovia's core banking business - and this agreement avoids the complexity and unavoidable loss of value in trying to separate them, which would have disrupted Wachovia's team members and customers," Kovacevich added.

"And, of course, this agreement won't require even a penny from the FDIC, '' he said.

The combined company will have a strong presence in Charlotte, which will be the headquarters for the combined company's East Coast retail and commercial and
corporate banking business. St. Louis will remain the headquarters of Wachovia Securities. In addition, three members of the Wachovia Board will be invited to join the
Wells Fargo & Company Board when the transaction is completed.

The combined company will be one of North America's most extensive financial services distribution networks:

Wells Fargo's Chief Financial Officer Howard Atkins said Wells Fargo used  conservative assumptions in evaluating this opportunity.

"As always, we only consider acquisitions that add to earnings per share no later than the third year after purchase and earn an internal rate of return of at least 15 per cent,'' said Atkins. ''This acquisition comfortably exceeds all our financial requirements. This is a unique opportunity to expand both our Community Banking and Wholesale Banking presence in current markets and enter some new markets by acquiring another full service financial services retail banking company with a strong culture of customer service and community involvement very similar to ours.''

The merged entity will create the premier coast-to-coast community banking presence, in 39 states and the District of Columbia.