Wachovia says it will press ahead with Wells Fargo deal
NEW YORK -- Wachovia Corp., at the center of a fight between Wells Fargo & Co. and Citigroup Inc. over who will buy the beleaguered bank, is moving ahead with its deal to sell itself to Wells Fargo — while questions arise about the damaging effects that prolonged litigation might have on Wachovia.
Wachovia responded Sunday to a New York judge's order temporarily blocking the sale of the bank to Wells Fargo with a lawsuit of its own, asking a federal judge in Manhattan to allow the deal to go through. A hearing on Wachovia's request was being held Sunday afternoon.
Late Saturday, New York State Supreme Court Justice Charles Ramos issued the order blocking the sale of Wachovia, which Wells Fargo had agreed to purchase in its entirety in a $14.8 billion deal. Citigroup accused Wells Fargo of trying to cut off its earlier takeover offer of Wachovia's banking operations for $2.1 billion in a deal struck with the assistance of the Federal Deposit Insurance Corp. On Friday, four days after that deal was struck, Wells Fargo said it was buying all of Charlotte-based Wachovia.
In its request to Ramos, Citigroup invoked an exclusivity agreement in the deal that bars Wachovia from talking with other potential buyers.
Wachovia responded by asking U.S. District Judge John Koetl to declare that the Wachovia-Wells Fargo agreement "is valid, proper and not prohibited by a letter agreement between Wachovia and Citigroup."
Citigroup said in a statement announcing Ramos' ruling late Saturday it "is prepared to continue negotiations with Wachovia on the parties' previously agreed-to transaction."
It was quite possible that litigation among the three banks could go on for some time; any ruling by either judge was likely to be appealed. A protracted court fight raised the possibility that Wachovia, already hurt by billions of dollars in losses from failed mortgages, will further weaken. However, the government, which has closed and then seized failing banks including Washington Mutual Inc., the nation's largest thrift, would likely step in if the bank were in jeopardy.
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