Citigroup, Wells Fargo square off in a winner takes Wachovia duel

Earlier this week, Citigroup said it had made successful a government-backed bid to acquire troubled bank Wachovia. However, after lying low throughout the week, Wells Fargo said on Friday that it has signed a definitive agreement to buy Wachovia in an all-stock deal worth $15.1 billion, a bid which, if successful, would catapult it into the big league of national consumer banks.

According to sources close to the development, Citigroup, shocked by Wells Fargo's move has demanded that the transaction between Wells Fargo and Wachovia be called off or Wells Fargo faces the risk of a legal action as Citigroup had an exclusivity agreement with Wachovia and had been providing support to the latter since it announced the deal on Monday.

Wells Fargo executives, however, said in a conference call that they had been in talks with Wachovia before the Citigroup deal was announced, and had looked at data that Wachovia offered, but did not talk to the bank after the Citigroup deal was made public.

"This deal 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 CEO, Wachovia, after its board approved Wells Fargo's offer.

However, Citigroup has made it clear that it would have none of it. "Citi has substantial legal rights regarding Wachovia and this transaction. Wachovia's agreement to a transaction with Wells Fargo is in clear breach of an exclusivity agreement between Citi and Wachovia," the bank said in a statement.

"Any such agreement between Wachovia and Wells Fargo is illegal," said Vikram Pandit, chairman, Citigroup. "We continue to vigorously pursue Citigroup's interest and rights in completing this transaction."

Brushing off Citigroup's threats of legal action, Wells Fargo chairman Richard Kovacevich said, "We're confident that this deal goes through."

"The taxpayer doesn't pay a penny," he said, as Well Fargo's offer does not depend on any financial assistance from the Federal Deposit Insurance Corp (FDIC) or any other government agency.

"We get sued all the time and many times the suits are meritless," Kovacvich said, adding that the bank's lawyers are looking into the matter.