Citi fumes as Wells Fargo steals Wachovia

04 October 2008

How does the hyena steal a kill from the cheetah in the African Sahara? Don't go that far; just ask Richard Kovacevich, the shrewd Wells Fargo chairman, as to how he managed to seal the Wachovia deal from right under the nose of Citibank. (See: Citi to acquire Wachovia assets in a US government-backed rescue) 

Wells Fargo stunned Citi and the industry when it announced on Friday that it had signed a deal to buy Wachovia for more than $16 billion (See: Wells Fargo edges Citi to grab Wachovia for $15.1 billion) , just four days after Citi agreed to acquire Wachovia's banking operations for a little over $2 billion, a deal brokered and backed by the US government.

Till late on Thursday night Citi's top executives were working out the operational details and integration plans with Wachovia executives and had no inkling to the backdoor negotiations that Wachovia was having with Wells Fargo simultaneously.

Top Citi executives must have been pleased with the outcome of the cheap acquisition since Citi's focus had always been on overseas businesses where it expanded and earned good returns. With the acquisition of Wells Fargo Citi would have been able up to expand and its deposit base in the US.

So pleased were they at the Citi-Wachovia deal, that Citi released newspaper advertisements all across the US, boasting about its deal with Wachovia. "Citbank is honoured to enter into a partnership with Wachovia, together we will be part of the largest financial services company in the world," the ad proclaimed.

Vikram Pandit, the CEO of "Citi that never sleeps" was roused from sleep at 2:15 by Wachovia CEO Robert Steel, who informed him that the deal was off as Wells Fargo had agreed to buy Wachovia, lock-stock and barrel for more than $16 billion.