Wells Fargo Buys Wachovia for $15.1 Billion

by Jordan Yerman | October 3, 2008 at 07:55 am

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Though previously reported to be in buyout talks with CitiGroup, Wachovia Bank will be purchased by Wells Fargo & Co. without bailout assistance from the FDIC. Wachovia's website confirms the deal in a press release.

The Wells Fargo offer is for $7 a share in stock, based on Thursday's closing price, 79% above where Wachovia shares finished. Wells Fargo also will assume Wachovia's preferred stock and debt.

In conjunction with the deal, Wells Fargo will issue $20 billion in new securities, mainly common stock. Wachovia shares surged 64% premarket to $6.40 while Wells Fargo rose 1% to $35.50 and Citigroup fell 6% to $21.15.

A key difference is that the Wachovia deal will be done without government assistance, while the Citigroup deal would have been done with the help of the Federal Deposit Insurance Corp.

"This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support," Robert Steel, Wachovia's president and chief executive, said in a statement.

However, CitiGroup is not giving up so easily, though their offer was not nearly as advantageous to Wachovia.

Citigroup, for its part, demanded that Wells Fargo and Wachovia terminate the deal, saying it breached an exclusive agreement. "Citi has substantial legal rights regarding Wachovia and this transaction," Citigroup said in a statement. "Wachovia's agreement to a transaction with Wells Fargo is in clear breach of an exclusivity agreement between Citi and Wachovia."

Just remember: if you're a Wachovia customer and you get an email from "Wells Fargo" asking you to reconfirm your account details, it's a phishing attempt.