Citigroup Abandons Wachovia Fight; Will Seek Damages

Financial giant Citigroup said Thursday it will walk away from its attempt to acquire Wachovia, paving the way for Wells Fargo to take over the Charlotte, N.C. consumer bank.

Citigroup said in a statement that it had not reached an agreement with Wells Fargo in negotiations surrounding Wachovia. Citi cited “dramatic differences in the parties’ transaction structures” for its primary motivation in stepping aside.

Less than two weeks ago, the Federal Deposit Insurance Corporation (FDIC) announced that Citigroup would be buying Wachovia with the help of the FDIC (“Citigroup to Buy Wachovia Banking Operations: FDIC,” Sept. 29). At the time, the FDIC made it clear that Wachovia did not fail and that it was not taking the bank over.

By the end of last week, Wells Fargo and Wachovia made a surprise announcement that they would merge without the FDIC’s help, effectively nullifying the deal Citigroup had in place (“Wells Fargo to Acquire Wachovia Instead of Citigroup, But…,” Oct. 3). Citigroup, which claimed it was blindsided by the announcement, filed suit to stop the deal and commence with the buyout agreement it had in place.

In stepping aside Thursday, Citigroup said that it will seek damages. The company said that it believes it still has a claim to the Wachovia deal. “We did not seek the Wachovia transaction; Wachovia brought it to us,” Vikram S. Pandit, the chief executive of Citigroup, said in a statement.

But rather than asking regulators to halt the Wells Fargo-Wachovia merger, Citi said it would seek compensatory damages. Citigroup could seek up to $60 billion in damages from Wells and Wachovia.

Wells Fargo made a fresh offer for Wachovia Thursday; $15 billion in stock with no help from government regulators.

If the merger goes through, Wells Fargo will become one of the largest banks in the U.S., with $1.42 trillion in assets, 48 million customers and 280,000 employees.