Finance News

Citigroup and Wells Fargo are going to buy Wachovia Corp.

According to unofficial data, the U.S. bank Wachovia Corp. is negotiating with potential buyers about the takeover. Among the possible nominees are Citigroup Inc. and Wells Fargo & Co.

Citigroup is among the parties in talks with Wachovia, the two sources said, and one source said Wells Fargo & Co was also in discussions. The New York Times said the two companies were locked in a bidding war for a possible takeover of Wachovia, citing people involved in the talks. The U.S. government, led by the Federal Reserve and the Treasury Department, is also involved in the talks, the newspaper said.

The government is resisting guaranteeing some of Wachovia's assets, as it did for Bear Stearns when it engineered that company's sale to JPMorgan Chase & Co, and is also opposed to taking over Wachovia unless its financial position deteriorates more rapidly.

Citigroup and Wells Fargo are unlikely to bid more than a few dollars a share for Wachovia, whose shares closed Friday at $10, the newspaper said. It is unclear whether Wachovia would be sold as a whole or be broken up, or how much Wachovia bondholders might lose in any transaction, it said.

A Wachovia spokeswoman declined to comment. Citigroup and Wells Fargo could not be immediately reached for comment. Investor concern about Wachovia mounted Friday after JPMorgan said it would take a $31 billion write-down on loans it acquired when it took over Washington Mutual Inc's banking unit on Thursday.

The write-down raised worry that Wachovia might have to take much larger write-downs on a $122 billion portfolio of option adjustable-rate mortgages it largely inherited when it bought California lender Golden West Financial Corp in 2006.

Wachovia' net losses for the Q2 of 2008 amounted to $8.9 billion dollars, while during the same period the year before the company received a net profit of $2.34 billion. The Bank clarified that this amount included losses of $ 6.1 billion from the depreciation of U.S. securities in connection with the mortgage crisis.

Source: Financial News
Date: 02.10.2008 [ID: 194]

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