By Lisa Kerner
Charlotte, N.C., Oct. 3 - Wachovia Corp. agreed to be acquired by Wells Fargo & Co. in a stock-for-stock transaction deal that doesn't require financial assistance from the Federal Deposit Insurance Corp. or any other government agency.
Wells Fargo said it will acquire all of Wachovia including all its businesses and obligations -preferred equity and debt included - and all its banking deposits.
Both financial services companies' boards of directors unanimously approved the deal, which is valued at $7.00 per share, or approximately $15.1 billion.
The merger agreement gives Wachovia shareholders 0.1991 shares of Wells Fargo common stock in exchange for each share of Wachovia common stock, according to a Wachovia news release. Wells Fargo closed at $35.16 (NYSE: WFC) on Oct. 2.
"As always, we only consider acquisitions that add to earnings per share no later than the third year after purchase and earn an internal rate of return of at least 15%," Wells Fargo chief financial officer Howard Atkins said in a company statement. "This acquisition comfortably exceeds all our financial requirements."
Citi objects
Citigroup Inc. said the agreement clearly breaches its exclusivity agreement with Wachovia and demanded Wachovia and Wells Fargo terminate the deal.
According to Citi, it was negotiating in good faith and nearly completed the definitive agreements required to complete the Citi/Wachovia transaction.
Citi agreed in principle to acquire Wachovia's retail bank, corporate and investment bank and wealth management businesses with loss protection provided by the FDIC, it was previously reported.
New York-based Citi was offering to pay Wachovia approximately $2.16 billion in stock and assume Wachovia's senior and subordinated debt, totaling approximately $53 billion.
'Superior value'
"This agreement represents a compelling value for Wachovia shareholders," Wells Fargo chairman Dick Kovacevich said in a company news release. "It provides superior value compared to the previous offer to acquire only the banking operations of the company and because Wachovia shareholders will have a meaningful opportunity to participate in the growth and success of a combined Wachovia-Wells Fargo that will be one of the world's great financial services companies."
San Francisco-based Wells Fargo said the combined company's East Coast retail and commercial and corporate banking business will be based in Charlotte, N.C., where Wachovia currently has its headquarters. Wachovia Securities will remain based in St. Louis.
Three members of Wachovia's board of directors will be invited to join the Wells Fargo board once the merger closes.
Wachovia and Wells Fargo also announced a share exchange agreement under which Wachovia is issuing Wells Fargo preferred stock that votes as a single class with Wachovia's common stock representing 39.9% of Wachovia's voting power.
Wells Fargo was advised by J.P. Morgan Securities Inc. Wachovia was advised by Goldman, Sachs & Co. and Perella Weinberg Partners.
| Acquirer: | Wells Fargo & Co.
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| Target: | Wachovia Corp.
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| Announcement date: | Oct. 3
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| Transaction total: | $15.1 billion
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| Price per share: | 0.1991 Wells Fargo shares
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| Expected closing: | Upon approvals
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| Stock price for acquirer: | NYSE: WFC: $35.16 on Oct. 2
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| Stock price for target: | NYSE: WB: $3.91 on Oct. 2
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