Charlotte, Charlotte chamber of commerce
Rick Havner/AP
A Wachovia sign is shown near the company’s headquarters, background, in Charlotte, N.C.

Wells Fargo Edges Out Citigroup to Take Over Wachovia

October 03, 2008 11:17 AM
by findingDulcinea Staff
Wachovia is being taken over by Wells Fargo for $15.4 billion, four days after Wachovia agreed to sell its banking units to Citigroup for $2.16 billion.

Wells Fargo to Buy Wachovia Without Government Assistance

Wells Fargo is taking over the Charlotte, N.C.-based bank for $7 per share, a 79 percent premium over Wachovia’s Thursday closing price. The buyout is in stock, meaning that Wachovia shareholders will get some 0.1991 shares of Wells Fargo stock per Wachovia share. In addition to releasing $20 billion in securities, the lion’s share of it common stock, Wells Fargo is also to take responsibility for Wachovia’s debt and preferred stock.

A combined Wells Fargo-Wachovia will have total assets of $1.42 trillion, a deposit base of $787 billion, and 10,000 bank branches. Wachovia shareholders and U.S. financial regulatory authorities still have to greenlight the deal. But Wells Fargo is confident it will be passed by the end of the year.

Wells Fargo CEO Dick Kovacevich was quoted as saying by the Associated Press that the Wells Fargo deal “provides superior value … to acquire only the banking operations of the company and because Wachovia shareholders will have a meaningful opportunity to participate in the growth and success of a combined Wachovia-Wells Fargo that will be one of the world’s great financial services companies.”

On Monday Citigroup made a $2.16 billion bid for Wachovia’s banking unit only. Part of the deal, which had already been approved by both banks’ boards, would have entailed the New York bank picking up $53 billion of Wachovia’s debt and $42 billion worth of losses of its $312 billion in loans. The FDIC was to cover the rest of the losses for $12 billion in preferred stock and warrants from Citigroup.

Following the merger, Charlotte is to remain the home of Wachovia’s retail, commercial and corporate banking units. Wachovia Securities will keep its current base in St. Louis.

The sale of Wachovia to Citigroup was making many in Charlotte uneasy, as the banking sector is a major employer in the city. Wachovia employs 20,000 people in Charlotte, according to the Observer. In 2006, it was the city’s second-largest employer, behind Carolinas HealthCare System, which employed 26,283, according to the city’s chamber of commerce.

Charlotte Mayor Pat McCrory told the Charlotte Observer on Monday, when it looked like the Citigroup offer would go through, that “it is essential that Wachovia maintains a strong presence in North Carolina.”

Bank of America, which took over Merrill Lynch in mid-September, also calls Charlotte home. Banktown, as the city is also known, is the 20th largest city in the United States.

Opinion & Analysis: The fate of Charlotte

Mary Newsom, on her blog “The Naked City,” wonders what will happen to a 48-story tower Wachovia had been building in Charlotte.

“Will it stop the tower under construction? I think that’s unlikely. But an oversupply of office space may cause uptown rents to sink. Call it ‘affordable housing for offices,’” she wrote. Wachovia was supposed to take half the office space in the 1.5 million square-foot tower, which, as of June, had been fully leased, she said.

At the blog Ask Doug Smith, Doug says Banktown will never be the same.

“This is the day Charlotte leaders and financial analysts feared would come but hoped they would never see. Wachovia, so long the hunter, became the hunted,” Smith wrote. 

The financial clout the town got from having a large bank headquarters was a “recruiting tool” for Charlotte’s Chamber of Commerce, and gave “civic boosters something to brag about,” he said. 

Not everyone has been sympathetic to Charlotte’s possible plight. Yvette Kantrow, writing on the site, asked Banktown, “how does your barbecue taste now?” She said when Bank of America bought Merrill Lynch, the Observer gloated about a New York bank having to move down South.

Kantrow quoted columnist Doug Smith as saying, “When the merger is completed, those New York City dudes will be reporting to a Southern bank in a city where NASCAR rules and pork barbecue is gourmet cuisine. The North is taking note that the South has power and influence. And tasty barbecue. I bet those Merrill Lynch investment bankers will like it.”

Background: CEO retired in June at board’s request

Problems had been plaguing the bank for several months. Kennedy Thompson was forced into retirement in June after Wachovia had lost half its market value in a year, according to findingDulcinea.

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