Wells Fargo to get Wachovia; rival walks

Citigroup said it won't interfere in Wells Fargo's $15 billion takeover of Wachovia, but is suing for $60 billion in damages. (Jessica Rinaldi/Reuters)

NEW YORK - Citigroup Inc. walked away from its attempt to buy Wachovia Corp., handing victory to Wells Fargo & Co. in a struggle for the nation's sixth-biggest bank.

Citigroup said yesterday it won't interfere in Wells Fargo's takeover, scrapping a $2.2 billion bid for part of Wachovia's banking operation. Wells Fargo trumped Citigroup with a $15 billion bid for the entire company. Citigroup is suing for $60 billion in damages.

"Wells Fargo just won lock, stock, and barrel," said Tony Plath, a finance professor at the University of North Carolina at Charlotte.

For San Francisco-based Wells Fargo, which has stayed profitable amid the worst housing crisis since the Great Depression, the Wachovia purchase is its biggest since Norwest Corp. bought the old Wells Fargo 10 years ago and kept its name. Wells Fargo's purchase includes a mortgage portfolio that's expected to produce $74 billion of write-downs and losses.

"The opportunities the franchise brings to us over time more than compensates for those losses," chairman Richard Kovacevich said after Wells Fargo revealed the agreement Oct. 3. "There will be some hard work needed to work through these asset problems."

Wells Fargo gains control of a bank with $448 billion of deposits in 21 states. It would be the biggest US bank by number of retail locations, with 6,675 branches, compared with Bank of America Corp.'s 6,139. Almost half of Wachovia's branches are on the East Coast, while Wells Fargo's are mostly in California and the Southwest.

Wells Fargo's all-stock bid, originally valued at $7 a share, declined this week as the bank's stock fell. Based on Wells Fargo's closing price yesterday of $26.50, the offer is worth about $5.25 per Wachovia share.