There are some very happy Wachovia shareholders, and advisors, out there this morning. Wells Fargo agreed to acquire all of Wachovia’s operations for $15.4 billion, or about $7 a share, in an all stock deal, the companies announced on Friday--without any help from the government. This obviously scuttles the firm’s prior deal with Citigroup, which would have gotten FDIC backing: Just Monday, Citi announced it was buying Wachovia’s branch network, deposits and its private bank, for $1 a share, or $2 billion. That would have left Wachovia Securities, the retail brokerage, and the asset management operations, on their own.
As of yesterday, Wachovia shareholders had begun to express their opposition to the Citigroup deal.
In a statement issued this morning, Citigroup said that Wachovia's deal with Wells Fargo was a clear breach of its exclusivity agreement with Citigroup and is demanding that they terminate their deal. According to an email "alert" from The Wall Street Journal, citing a person familiar with the matter, the bank is considering sweetening its offer and possibly suing the two companies.
One Wachovia advisor, speaking off the record, says he is very pleased with the Wells deal, and so are his clients, many of whom called this morning to tell him so. "I think it’s a great deal. It's better than the Citi deal because it’s the whole firm," he says. The advisor likes that the brokerage has hooked with a bank because of the stability that arrangement offers, and because he already manages his clients' liabilities, so having Wells Fargo, a triple-A rated bank, backing his clients up is a big positive.
The advisor had to miss a conference call with management this morning to meet with a client. While he has since spoken with management, he hasn't heard anything about a retention package. Still, he's expecting there will be one, he says.
"We were all kind of expecting this," he continues. "Wells Fargo and Wachovia have been talking to eachother about doing a deal here for seven or eight years."
Another top advisor, formerly of AG Edwards, says that if the deal with Wells Fargo does get done, he doesn't expect to hear about a retention package for some time. "Look at Bank of America and Merrill," he says. Still, he bets that legacy AG Edwards reps won't get a cent, because they already got retention money earlier this year. Legacy Wachovia reps, he predicts, might get something very similar to what AG Edwards reps got from Wachovia in transition money.
He, too, is very happy with the Wells Fargo deal. "It's wonderful because they have agreed to keep the home office as it is," he says. What's more, under the Citi deal, Wachovia Securities' future was a big question mark. Under the Wells Fargo deal, they get bought by the healthiest bank in the U.S. "Now the game is about survival. The advantage that we would like is the certainty of having that part of our life square amidst all the other turmoil, the rescue package and all that. It’s bad enough that we have to continue with a stock market that’s a mess."