Whew! Not too crazy, huh?
Wachovia has spurned the FDIC-brokered deal with Citibank in favor of a new deal with Wells Fargo valued at almost $16b. The deal with Citi was for a paltry $2b. My opinion of Bob Steel just went up a couple notches.
Considering that Wells was deep into merging with Wachovia until it got a good look at its loan portfolio, you have to wonder what changed. Well, the near certitude that some massive Wall Street bailout bill will pass Congress has to be one of them. Wells also seems very certain it can issue more stock to pay for the deal. Watch its share price today.
From a distance the deal makes sense. Wells always made the most sense as a mate for Wachovia. It is a rough merger of equals with different footprints. Charlotte will be the East Coast HQ for retail and commercial banking and Wachovia will not be chopped into pieces in the process.
All-in-all, a much superior outcome for Wachovia employees, shareholders, and Charlotte. For now. Let’s see if the deal is still on come Monday.
Bonus Observation: Wither Citi? It is now on the outside with investors and depositors wondering about its balance sheet going forward. Isn’t this all fun?
