When Wells realized how good a deal Citi had with their $1 per share acquisition of Wachovia’s banking unit, they trumped Citi’s bid by roughly 700% AND did it without FDIC assistance. Wells was the other potential white knight all along, but backed out during the final FDIC-driven negotiations, so they knew enough to make a good offer.
The FDIC really put itself in a bind on this one. By pursuing an “open bank” resolution, the FDIC did not remove Wachovia’s shareholders from the mix, leaving the door open for a better offer that Wachovia’s board had to consider and that the shareholders would likely prefer. While the FDIC would like to get rid of Wachovia without assistance, failing to continue to support Citi’s bid would weaken the FDIC’s ability to resolve other institutions prior to failure. On Friday, Citi seemed to acknowledge that they had been bested by Wells, but the legal and regulatory implications of their rebuffed “rescue” deal may continue for a while.
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