In a surprise development, Wachovia Corp. and Wells Fargo & Co. announced a $15.1 billion merger yesterday. In doing so, Wachovia spurned a deal with Citigroup announced this week that was brokered by federal regulators.
But shunned Citi is not going away quietly and has demanded that Wachovia and Wells Fargo put a halt to their plans. And federal regulators are backing the Citi deal.
Meanwhile, Wachovia customers in the Baltimore area, where the North Carolina-based company is the third-largest bank based on deposits, are left wondering whether they will be part of Citi or Wells Fargo by the end of the year.
One of the major differences between the two deals is government involvement. Citi's deal, announced Monday, would require assistance from the Federal Deposit Insurance Corp. The merger with San Francisco-based Wells Fargo would not.
By merging with Wachovia, Wells Fargo would become the nation's largest bank, with $787 billion in deposits and 10,761 branches. Wells Fargo branches are spread across 23 states, mostly in the West and Midwest. With Wachovia, Wells Fargo would have branches in 39 states, with many of the additional states on the East Coast.
Wells Fargo has no banking branches in Maryland, although it has 20 home mortgage stores, 22 financial stores and one regional commercial bank in the state.
Wachovia customers are not expected to see any changes in their bank branches under the Wells Fargo deal.
The jobs of Wachovia employees in investment banking and trading, though, could be in jeopardy unless Wells Fargo decides to expand in those businesses, said Chris Mutascio, a managing direcctor of Stifel Nicolaus in Baltimore.
Wells Fargo officials, who were not available for interviews yesterday, told analysts they expect the merger to close by the end of the year. The Wachovia name would disappear.
Under the Wells Fargo merger, the bank would acquire all of Wachovia in a stock swap. Wachovia's shareholders would receive 0.1991 shares of Wells Fargo common stock for every share of Wachovia stock they hold, valuing Wachovia at $7 per share.
Citi had agreed to buy Wachovia's banking operations for $2.16 billion.
It promised to assume $53 billion worth of debt and absorb up to $42 billion of losses in Wachovia's $312 billion loan portfolio.
The FDIC would cover any additional losses in exchange for $12 billion in Citi preferred shares and warrants.
