Banks Stocks Contiue To Look Awful!!
Rising Wedge Break Down And New Lows On The Way
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Citigroup said it won a court order late Saturday blocking Wells Fargo. From buying hobbled U.S. bank Wachovia Corp until the court rules otherwise.
Citigroup, which planned to buy Wachovia's banking assets for $2.2 billion, said New York State Supreme Court Justice Charles Ramos granted an injunction extending Wachovia's agreement to negotiate exclusively with Citigroup.
Citigroup and Wells Fargo are battling for control of sixth-largest U.S. bank Wachovia, which has been hit hard by bad mortgages amid turmoil in global credit markets, but has a large network of branches.
Citigroup, the largest U.S. bank, announced last Monday it had agreed to buy Wachovia's banking operations in a deal backed by the U.S. government. That deal did not include a signed merger agreement, but Wachovia did sign an agreement to only negotiate with Citigroup through Monday, Oct. 6.
On Friday, however, Wells Fargo said it had signed an agreement to buy the whole of Wachovia, including its asset management unit and retail brokerage, for about $15 billion, roughly seven times more.
Wachovia said early Sunday that it believes its agreement with Wells Fargo is valid and proper, and is best for shareholders, employees and U.S. taxpayers.
Citigroup, which has sustained about $60 billion of write-downs and losses during the credit crunch, planned to buy Wachovia's banking assets with U.S. help, including partial government guarantees on a $312 billion Wachovia loan book.
The deal is important for Citigroup Chief Executive Vikram Pandit, who is looking to turn around the ailing bank in part by focusing on stable businesses such as consumer banking.
Wells Fargo, the seventh-largest U.S. bank by assets, has managed to remain consistently profitable during the credit crunch. Its bid would not require government backing.
Regulators said Friday they had not looked at the Wells Fargo bid.
Under that bid, for each share of Wachovia, investors would receive 0.1991 of a Wells Fargo share, which is equal to $6.88 a share based on Wells Fargo's closing price Friday of $34.56.
U.S. banks have been scrambling to build or buy branches, which allow them to raise money from depositors. In a credit crunch, deposit funding can be cheap compared with borrowing in bond markets.
Winning the Wachovia branches would help Citi bolster its relatively weak network of U.S branches, which number about 1,000 compared with Wachovia's 3,300 and Wells Fargo's 3,400.
"Citigroup is always free to make a superior offer to Wachovia," spokeswoman Christy Phillips-Brown said.
In a statement released later Sunday, Wells Fargo said it has a binding merger agreement with Wachovia.
"We are confident that we will complete our announced merger with Wachovia. Nothing in the court's temporary order impacts our ability to ultimately do that," it said.
Citigroup said in its statement that it is prepared to continue negotiating with Wachovia, but Wachovia may not speak to others.
Some lawyers believe Citigroup could have a real case, noting the exclusivity agreement and the fact that Citigroup provided financial support to Wachovia last week.
"Those are clearly strong facts on Citi's side," Morton Pierce, chairman of the mergers and acquisition group at law firm Dewey & LeBoeuf, said on Friday. Dewey & LeBoeuf is not representing any of the parties in the transaction.
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