Citigroup abandons bid for Wachovia and seeks damages

US TAKEOVER: CITIGROUP SAYS it is walking away from talks to divvy up Wachovia bank's assets with Wells Fargo, adding that it would seek damages from the other two banks, but not seek to bar a Wells Fargo takeover of Wachovia from proceeding.

Dramatic differences in transaction structures and views of risks made mutually acceptable agreements impossible, Citi said in a statement.

Citigroup, Wells Fargo, and the Federal Reserve were negotiating over the future of Wachovia, a regional bank hobbled by the credit crisis, but with a valuable network of branches.

Citigroup preliminarily agreed at the beginning of last week to buy Wachovia's banking assets with partial government assistance and supported Wachovia last week while they hammered out final details. But Wells Fargo on Friday said it had signed an agreement to buy all of Wachovia, including its asset management and retail brokerage arms.

Wells and Citigroup fought in court last weekend, but on Monday agreed to suspend litigation - a suspension that had been due to expire on Wednesday at noon. In a statement, the banks said the deadline was extended in consultation with the Federal Reserve to yesterday morning.

But late on Thursday Citi said it believes it has strong legal claims against Wachovia and Wells Fargo for breach of contract and tortious interference with contract.

"Citigroup plans to pursue these damage claims vigorously on behalf of its shareholders," Citi said. "However, Citigroup has decided not to ask that the Wells Fargo-Wachovia merger be enjoined."

Wells Fargo has managed to remain profitable during the credit crunch, while Citi is looking to turn around its business after posting about $60 billion in write-downs and losses during the year.

Citi chief executive Vikram Pandit said: "We did not seek the Wachovia transaction; Wachovia brought it to us. Our focus remains on capitalising on our global strengths."

(Reuters)

This article appears in the print edition of the Irish Times