Wells Fargo edges Citi to grab Wachovia for $15.1 billion

03 October 2008

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.