Citigroup (NYSE: C) has dropped out of the bidding for damaged bank Wachovia (NYSE: WB). It may be glad it did. According to The Wall Street Journal, "Wells Fargo & Co. (NYSE: WFC) won the battle for Wachovia Corp. as rival suitor Citigroup Inc. walked away from compromise negotiations because of worries about the quality of some of Wachovia's assets."
Citi wanted the FDIC to put a safety net under the value of some of Wachovia's assets. Investors and analysts viewed the Wells Fargo bid as better because it valued Wachovia's share price at a higher level and did not involve any government guarantees at all.
The lack of government guarantees and the likelihood that Wachovia's balance sheet is getting worse each day could cause Wells Fargo to pass on a buyout just as Citi did. In a credit crisis as severe as this one, it is almost certain that the value of bank assets is dropping due to mortgage-backed paper and weak loans. Wachovia has been viewed as having a balance sheet that is worse than any other large American banks. That would make it likely that its situation has gone from being troubled to being desperate.
At this point, the odds have to be 50/50 that Well Fargo will either disappear or sharply drop the value of its offer.
Douglas A. McIntyre is an editor at 247wallst.com
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Reader Comments (Page 1 of 1)
10-10-2008 @ 11:04AM
nightnightshark said...
Bush to buy Citibank!
There's a very good chance the United States government will now be buying some of our biggest banks as many now seem to be on the verge of failure. With Wells Fargo winning the battle against Citibank for Wachovia, it appears Citibank "may" not be able to survive without....
continued at....
www.mortgagebreakdown.com
10-18-2008 @ 3:53PM
Al Pierce said...
Every common share stockholder should contact Wachovia.com and complain the way this buy by Wells Fargo and Wachovia is conducted only ,1999 shares of Wells Fargo for each share of Wachovia,the common shares of Wachovia should be priced much higher. the stockholder did not get to vot on this deal. they got screwed,bad deal.