US bank Wells Fargo said yesterday it was buying rival Wachovia for US$15.1 billion in stock, ending a government-backed plan for Citigroup to take over Wachovia’s banking operations.
Wells Fargo and Wachovia “signed a definitive agreement for the merger of the two companies” without government assistance, the two firms said in a statement.
It said the deal covered “all of Wachovia’s banking operations in a whole company transaction requiring no financial assistance from the Federal Deposit Insurance Corporation or any other government agency.”
Wells Fargo will record Wachovia’s distresses assets “at fair value,” the statement said. The acquisition will cost Wells Fargo some US$10 billion in integration expenses, and the San Francisco-based bank will issue up to US$20 billion in securities to bolster its capital position. Under terms of the deal approved unanimously by the boards of both companies, Wachovia shareholders will receive 0.1991 shares of Wells Fargo common stock in exchange for each share of Wachovia common stock, they said.
The transaction, which was based on Wells Fargo’s closing stock price of US$35.16 dollars on Thursday, is valued at US$7 per Wachovia common share for a total transaction value of approximately US$15.1 billion, the companies said.
Wachovia has almost 2.2 billion common shares outstanding. The agreement requires Wachovia shareholder and regulatory approval.
“Today’s announcement creates one of the strongest financial firms in the world and is great for all Wachovia constituencies: our shareholders, customers, colleagues and communities. This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support,” said Robert Steel, president and chief executive of Wachovia Corp.
“The market presence and composition of our businesses, along with our service-oriented cultures, are extraordinarily complementary and this combination creates great potential for sustained stability and growth.” Wells Fargo chairman Dick Kovacevich said the deal was “a compelling value for Wachovia shareholders. It provides superior value compared to the previous offer to acquire only the banking operations of the company.”
Wachovia, the fourth largest US bank by assets, had been negotiating a merger with banking giant Citigroup, as Wachovia faced a near collapse in its share price.
The Wells Fargo statement said the board at Wachovia had accepted its offer late on Thursday.
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