The Sunday TimesOctober 5, 2008
Wachovia bank deal in the balanceIain Dey
DETAILS buried in the small print of the US government’s $700 billion (£365 billion) bail-out scheme could scupper a controversial takeover bid for American banking giant Wachovia.
Wachovia, America’s sixth-biggest bank, revealed on Friday it had struck a controversial deal to sell itself to rival Wells Fargo for $15 billion.
However, the deal came just four days after Wachovia reached a $2.2 billion agreement with Citigroup over a sale of its banking assets - supported by $312m of government guarantees.
Citi has made thinly veiled threats of legal action, pointing out that Wachovia signed an exclusivity agreement promising it would not court another bid until October 6.
Wells Fargo gallops in to snatch Wachovia
Citigroup attacks Wells Fargo over Wachovia bid
Now, Citi’s lawyers appear to be homing in on the small print of the government’s Troubled Asset Recovery Program.
Section 126 of the emergency funding bill, which was passed by Congress on Friday, reveals that any deal agreed with the financial support of the US authorities cannot be renegotiated and can be railroaded through against the wishes of the company itself.
Although the legislation was passed on Friday night, it is to be enforced retrospectively, which will bring the Wachovia deal with Citi under its remit.
Citi chief executive Vikram Pandit is said to be upset at losing the deal, which was hammered out last week while UK authorities worked on the nationalisation and sale of Bradford & Bingley, and the Dutch and Belgian regulators worked on a rescue for Fortis.
Citi’s shares plunged more than 18% on Friday as news of the failed deal emerged - the biggest one-day fall in the stock since October 1987.
Wachovia’s rival bid from Wells Fargo would not require any state backing and would see all of Wachovia’s assets change hands, as opposed to just its healthy ones.
A number of Wachovia’s biggest shareholders are calling on Citi to “back off” and allow the Wells deal to go through. Citi, though, seems determined on legal action.
Put this on a Jury Trial, the jury will side with Well Fargo Deal because it will save thousands of jobs, thus helping the american economy.
With the Citi Deal, thoussands of jobs will be lost.
Jury will side with Wells Fargo.
Thanks, I LOVE this part!
"Section 126 of the emergency funding bill, which was passed by Congress on Friday, reveals that any deal agreed with the financial support of the US authorities cannot be renegotiated and can be railroaded through against the wishes of the company itself.
Although the legislation was passed on Friday night, it is to be enforced retrospectively, which will bring the Wachovia deal with Citi under its remit."
This is interesting angle. Where's the M&A lawyer that posted on subject of the exclusivity agreement being rock solid. Could he/she evaluate the rescue plan Section 126 cited here and post an analysis?
It will come down that WB accepted C's money starting on Monday 29th Sept. This was used to keep Wachovia afloat. Steel was in Citi's office working out details for more tranfusions of capital to last until Monday. No company in American History that I know was asked to prop up a company for free---pos in c