Wells and Wachovia said to be in advanced talks
Wachovia was in advanced merger discussions with Wells Fargo late Sunday, the Wall Street Journal reported, citing people familiar with the discussions.
Wachovia was also in talks with Citigroup (NYSE: C) in New York over the weekend. But by late Sunday, Wells Fargo was emerging as the preferred bidder. Wells has a better track record of successfully integrating a major bank merger and has escaped the current credit crisis relatively unscathed.
In contrast, it was only last fall that Citi was criss-crossing the globe with tin cup in hand, seeking to raise billions to offset its substantial losses amid the credit crisis.
Both Wells (NYSE: WFC) and Citi see an acquisition of troubled Wachovia's extensive branch network in the Eastern United States and deposits as a rare prize.
Details on the Wells-Wachovia negotiations were not available late Sunday.Even though Wells would have the upper hand in acquiring Wachovia, the combined bank's name, its management team and its headquarters location were still open questions late Sunday.
In March, Wells Fargo CEO John Stumpf told the San Francisco Business Times that he was not averse to conducting a Fed-assisted deal similar to the help the central bank gave J.P. Morgan Chase to acquire faltering Bears Stearns in March. As of Sunday, the government was reportedly quite reluctant to provide similar aid to a buyer of Wachovia.
This month, Wells Fargo Chairman Dick Kovacevich told those attending a Beverly Hills business conference that the bank "often buys fixer-uppers.
"Given the financial conditions today, I feel like a kid in a candy store," Kovacevich said.
Spain's Banco Santander also was reportedly interested in Wachovia, but long-time industry observers were dubious that the U.S guaranteed approval cash advance loans. government would be interested in working with a foreign bank to rescue Wachovia.
A combination of San Francisco-based Wells Fargo and Charlotte-based Wachovia (NYSE: WB) has long been the subject of speculation among those following the banking industry. Wells brings to the table its dominance in the West, which would fit nicely with Wachovia's strong presence in the East.
Reports late last week indicated that struggling Wachovia was seeking a suitor. The bank fumbled badly on its ill-timed purchase of Oakland-based Golden West Financial, parent of World Savings. Much of the bank's mortgage woes stem from that $25 billion deal completed in 2006. Many analysts said that deal was a huge mistake even before it closed.
The U.S. Treasury and Federal Reserve were reportedly involved in Sunday's negotiations, presumably to help spur a deal that would put Wachovia in stronger hands. An acquisition of Wachovia by Wells Fargo would represent a departure from the San Francisco bank's long-running strategy of focusing on internal growth and concentrating on selling more products and services to customers within its current branch territory in the western half of the United States.
But last week's government-orchestrated deal in which J.P. Morgan Chase (NYSE: JPM) acquired failed Washington Mutual created the nation's second coast-to-coast bank, after Bank of America. (NYSE: BAC) Large branch networks allow banks to spread their costs over more customers, while providing those customers with greater convenience and access to ubiquitous branches and ATMs throughout much of the country.