Wells Fargo Emerges Victorious in Battle for Wachovia
Late yesterday, Citi gave up the fight for Wachovia, and the stock market has been rewarding all parties involved. Wells Fargo will now absorb Wachovia — without the aid of government assistance — as long as it gets the green light from the Federal Reserve. MarketWatch reports on Citi’s change of heart:
While Citigroup had offered a federally backed deal for Wachovia valued at $2.1 billion, Wells Fargo later offered a deal valued at $15 billion that included no government assistance. Citigroup and Wells Fargo then descended into legal wrangling over the matter, which included a possible division of Wachovia’s assets.
But in a statement released Thursday, Citigroup said: “The dramatic differences in the parties’ transaction structures and their views of the risks involved made it impossible to reach a mutually acceptable agreement.”
Citigroup added that it would not seek to prevent the merger between Wachovia and Wells Fargo, though it contended that it has “strong legal claims against Wachovia, Wells Fargo and their officers, directors, advisers and others for breach of contract and for tortious interference.”
The Federal Reserve, for its part, said in a statement that it would “immediately begin consideration of the filings submitted by Wells Fargo for approval to acquire Wachovia.”
This is a good example of the fact that there are some mortgage lenders out there with solid assets that are worth buying. All the panic over the financial market is a bit overdone, and the Wachovia story shows us that there are some good loans out there.
And it appears that some of those more solid assets are getting another look today. There have been some gains in the financial sector for companies like Bank of America, JP Morgan and other mortgage lenders that are mostly solvent. But whether this is a true turning point remains yet to be seen.
