Friday, October 3, 2008

Citi Cries Foul, Citing Exlusivity Agreement With Wachovia

The Wall Street Journal is reporting that Citi is claiming that Wachovia is in breach of the Exclusivity Agreement it signed with Citi earlier in the week. Citi states that "Wells Fargo's conduct constitutes tortious interference with the Exclusivity Agreement." Apparently, it's about to get ugly as Citi is using nasty legal terms like "tortious interference." The FDIC has put out a statement that it stands behind the Citigroup deal. Might we see a bidding war over Wachovia, who many had given up for dead at the beginning of the week? I find it hard to believe that the FDIC wouldn't welcome this opportunity to get out of the loss guarantee it granted to Citi and allow a much stronger institution to take over all of Wachovia. Not only is the Wells Fargo deal better for the FDIC, it is better for shareholders of Wachovia, for debtholders of Wachovia and for confidence in the market. Naturally, Citi is pissed because it thought it was getting a sweet deal and had catapulted itself into favored status with the government. But if it wants Wachovia, it better be prepared to pay more.

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