Not So Fast!

Citigroup Inc. is playing like a sore looser.

I’ll sue you if you don’t sell it to me ‘cause you said you would.

Well that may be so, but what would you do if you’re being offered $2.16B for your best assets by Citi and Wells Fargo comes by to offer you $15B for your entire company? There’s talk that Citi is setting up a lawsuit demanding $60B in damages.

I can tell you that if I had a parcel of Wachovia stock I’d be rooting for the Wells Fargo deal. That’s all well and good, but a New York State judge seems to be siding with Citi on this one and has extended the bank’s sole right to negotiate with Wachovia. The two banks appear in court together on October 10th.

So much for the free market.

Click here for related story on Bloomberg.com

 
Best Response

Respectfully, you are an idiot.

Citi has an exclusivity agreement that specifically forbid any solicitation or agreement into transactions with a third-party. Additionally, Citi has been providing liquidity support through a bridge loan since last Sunday. This liquidity, and the initial transaction at 2.14bn are the only reason that Wachovia is in business today. Wells Fargo was attempting to pull a "Barclays". Wait until the company declares bankruptcy and then come in and purchase only the pieces that interest you at firesale prices.

Additionally, to say that Citi is buying only the "best assets" is ridiculous. They are being forced to purchase over 300bn of toxic mortgages which are the reason that Wachovia went bankrupt in the first place.

A free market allows for the best price, but once you have signed a contract and a company acts on Good Faith to create solvency for your company, it is no longer an open bidding process.

If Wells Fargo had waited until October 6th, the time when the initial exclusivity agreement was set to expire, then there would not be any sort of claim Citi could make. The judge is siding with Citi because it is a clear cut case of tortious interference.

 

As it stands now, the Wells deal is better for taxpayers, Wachovia shareholders, and the FDIC. I think there's going to be a lot of pressure for Citi to either up their deal or for the Wells deal to go through from regulators to shareholders.

 

"better for taxpayers"--unclear. the reason wells is paying so much more for Wachovia is because they can use the losses wachovia has declared to reduce their tax bill.

and as a future point, the FDIC loses a lot of credibility by pulling this kind of shit. how many banks are going to listen to their pleas to overtake weak failing banks in these types of shotgun marriages when they carry the risk of the FDIC pulling the rug out from under you and then you get to watch as your market cap plummets 20% in one day?

 

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