Citigroup: "small compensation" for "jilting"

Jilted in Deal, Citi Will Get $100 Million

Excerpts:

Citigroup Inc. was jilted in 2008 when its bid for Wachovia Corp. fell apart and the battered bank fled to Wells Fargo & Co.

The New York bank finally got some revenge for being left at the altar, announcing on Friday that Wells Fargo will pay $100 million to settle "all claims related to this dispute," according to a joint statement by the two banks.

Citigroup had sought as much as $60 billion in damages from Wachovia and Wells Fargo, which announced their takeover agreement just four days after Citigroup thought it had won the Charlotte, N.C., bank.

The battle for Wachovia erupted barely two weeks after Lehman Brothers Holdings Inc. tumbled into bankruptcy and Merrill Lynch & Co. was sold to Bank of America Corp. Bank stocks were teetering, and rumors surged that customers were yanking deposits from weak banks. Wachovia was crumbling under the weight of bad mortgages.

Citigroup executives were enraged and humiliated by the disintegration of the Wachovia deal, which was hammered out with government assistance hours before Wachovia was set to be seized by regulators. Citigroup rushed in with a cut-rate offer of roughly $2 billion after Wells Fargo, of San Francisco, abruptly yanked its bid of more than $20 billion. The Wells Fargo offer didn't call for the U.S. government to back losses on bad loans.

Citigroup initially bragged that the takeover of much of Wachovia's operations made it a "pillar of strength." The deal would have tripled the size of Citigroup's retail-banking unit.

Within days, though, Citigroup Chief Executive Vikram Pandit was mulling the company's legal options. Wachovia agreed to sell itself entirely to Wells Fargo for $15.4 billion without any government aid. Wells Fargo became the largest U.S. bank in branches, though it assumed much more risk from Wachovia's mortgage portfolio than Citigroup had been willing to take.

...

Citigroup also claimed it had an exclusivity agreement with Wachovia not to negotiate or enter into competing bids, which was allegedly violated by Wells Fargo. A Wells Fargo court filing said Federal Deposit Insurance Corp. Chairman Sheila Bair had indicated to Wachovia that the Wells deal would be "superior" while Citigroup was attempting to finalize the announced agreement with Citigroup.

Citigroup sought more than $20 billion in compensatory damages and more than $40 billion in punitive damages from Wells Fargo for tortious interference.
...

Bert Ely, a banking consultant in Alexandria, Va., said the $100 million payment to Citigroup by Wells Fargo is "small compensation."

Comment: In the end it was better for Wachovia customers (being acquired by Wells Fargo). Hard to believe that was 2 years ago!