Wells Fargo settles Wachovia lawsuits with Citi for $100 million
20 Nov 2010
Wells Fargo & Co yesterday said that it will pay Citigroup Inc $100 million to settle multiple lawsuits after it edged out the New York-based lender with a higher bid for Wachovia Corp during the midst of the global financial crisis (See: Wells Fargo edges Citi to grab Wachovia for $15.1 billion).
The payment resolves ''all claims related to this dispute,'' both bankers said in a joint statement.
Citigroup had filed several suits and claimed as much as $60 billion plus damages from Wells Fargo in what Citi had claimed was stealing Wachovia in September 2008 after it had signed an exclusivity agreement to buy large portions of Wachovia in a deal that was brokered and backed by the US government.
Wachovia was close to collapsing due to its soured mortgage portfolio.
Under the deal signed on 28 September 2008, Citi was to acquire most of Wachovia's assets for $1 per share, valuing the Charlotte, North Carolina-based lender's banking operations at $2.16 billion. (See: Citi to acquire Wachovia assets in a US government-backed rescue)
But the Citi- Wachovia deal required guarantees from the US banking regulator Federal Deposit Insurance Corp (FDIC).
But just four days later, Wells Fargo, based in San Francisco stunned Citi and the industry when it announced that it had signed a deal to buy Wachovia for more than $16 billion (See: Wells Fargo edges Citi to grab Wachovia for $15.1 billion), a deal that was akin to a hyena swiping the cheetah's kill in the African Sahara.
The Wells Fargo deal did not require any financial assistance from the FDIC or any other government agency, but the transaction did evoke strong and offensive words from Citi's boss Vikram Pandit and FDIC chairman Sheila Blair.
Although the deal would have given Citi the opportunity to expand its retail business in the US and better compete with Bank of America JPMorgan Chase & Co, the lender itself had to be bailed out by the US government in a $45 billion infusion.
''We are glad to put this matter behind us, and we look forward to our two institutions working together constructively in the future,'' Wells Fargo said in the statement.
