Wachovia was once the fourth-largest bank in the United States, headquartered in Charlotte, North Carolina. In 2007, its total assets reached $783 billion.
The financial crisis triggered by the subprime mortgage crisis caused many banks to face operational difficulties, including Wachovia.
The original target for acquiring the bank was Morgan Stanley, not Wells Fargo. As early as late August of that year, news broke that Morgan Stanley was considering a merger with Wachovia and several other banks.
Then, on September 15th, Citigroup joined the fray, announcing that it had reached an agreement in principle with Wachovia, formerly the fourth-largest commercial bank in the United States, with the assistance of the Federal Deposit Insurance Corporation (FDIC). Citigroup agreed to acquire Wachovia's banking business for $2.16 billion in stock, including assuming $53 billion in Wachovia's liabilities.
At the time, Citigroup's acquisition of Wachovia had already been approved by both boards of directors, but the final agreement still required a vote by Wachovia shareholders, with a deadline of December 31, 2008.
Just as the market generally believed that Citigroup's acquisition of Wachovia was inevitable...
on October 3rd, Wells Fargo suddenly announced that it would acquire Wachovia for $15 billion in a stock-for-stock deal.
Furthermore, after the acquisition, Wells Fargo would invite three Wachovia directors to join its board and raise $20 billion in new shares through a public offering.
According to Barron's, Wells Fargo only joined Wachovia after learning of Citigroup's acquisition plans.
Notably, the Federal Reserve issued a public statement on October 3rd regarding Wells Fargo's new proposal. The statement indicated that the proposal had not yet been reviewed, and that regulators would strive to achieve an outcome that protected all Wachovia creditors and promoted market stability. The
statement also stated that Citigroup's proposal was under review by the Federal Reserve and the OCC.
On October 4th, an enraged Citigroup, having been "poached," filed a lawsuit against Wachovia and Wells Fargo, seeking a temporary restraining order, preliminary and permanent injunctive relief, specific performance of the exclusivity agreement, and punitive damages.
Undeterred, Wachovia filed a motion for a temporary restraining order on October 5th to prevent Citigroup from taking any steps to interfere with the execution of the Wachovia-Wells Fargo merger agreement. Concerned
that Citigroup and Wells Fargo's competing legal claims could have a destabilizing impact on these institutions, Wachovia, and the banking system as a whole, Federal Reserve representatives attempted to facilitate negotiations between Wachovia, Citigroup, and Wells Fargo to resolve their differences.
To allow time for these discussions to continue, Federal Reserve officials participated in negotiations to facilitate a ceasefire, or cessation of litigation, among the three companies.
Finally, on October 6, the parties finalized a standstill agreement—according to which Wachovia, Citigroup, and Wells Fargo agreed to suspend all formal litigation activities, including discovery, for two days and to cooperate in other ways to maintain the status quo in any litigation.
This agreement was later extended until October 10.
Consequently, on October 9, Citigroup announced the termination of negotiations with Wells Fargo regarding the Wachovia transaction, stating that it would not block the Wells Fargo-Wachovia merger. On
October 10, federal antitrust regulators approved Wells Fargo's proposed acquisition of Wachovia.
On October 12, the Federal Reserve also gave the green light to the transaction.
Upon completion of the merger, Wells Fargo will acquire $448 billion in Wachovia deposits. The bank announced that the combined company would have a presence in 10,761 districts across 39 states.
The Federal Trade Commission, originally scheduled to complete its review before the end of its 30-day review period, opted for accelerated approval. The Federal Reserve similarly expedited its review and approved the transaction, completing it within five days.
A notable feature of the transaction is that Wells Fargo will account for Wachovia's non-performing assets at fair value, demonstrating its robust balance sheet and ability to handle the necessary write-downs. This was a key factor in Wells Fargo's eventual victory over Citigroup in the acquisition of Wachovia.
Following the acquisition agreement, Wells Fargo announced its intention to transfer Wachovia's troubled assets to its own balance sheet for $10 billion and to issue $20 billion in common stock to strengthen its balance sheet. It was from that time that the BFT Fund began contacting and negotiating with Wells Fargo to purchase these common shares.
By then, Baron had invested in Goldman Sachs, Morgan Stanley, JPMorgan Chase, and Wells Fargo through IC Capital and the BFT (British Fortune Generation) Fund.
JPMorgan Chase and Wells Fargo were expected to alternate as the largest bank in the United States. He
also used Standard Chartered to acquire Merrill Lynch, forming Standard Chartered-Merrill Lynch.
He had capitalized on the subprime mortgage crisis to essentially complete his investment in American commercial and investment banks.
However, the US stock market had not yet fully fallen, and the stock prices of most companies were still declining for over three months.
Therefore, although the Black Swan Fund had already withdrawn some of the profits from its short-selling of the subprime mortgage crisis, his short-selling was not over.
...
"For Friends Provident Group, it's nothing more than a question of acquisition price. Our last offer was considered insincere, and according to our analysis, their board of directors' psychological expectation is more than $3 billion..."
Under Barron's instructions, Amber Sheehan did not lower the acquisition price to the lowest through continuous negotiations, but instead focused on acquisition efficiency...
He said to Barron:
"Although I think that a price below $2.7 billion can completely force the other party's board of directors to succumb to pressure from shareholders, it is indeed like you said, if time goes on, it will easily attract the attention of other insurance giants, such as Prudential Group..."
"And in the final analysis, the acquisition of Friends Provident Group is not our ultimate goal, but only a part of all plans, and it is not appropriate to spend too much time on it."
Barron said:
"Most of the time, in order to achieve strategic goals, even if tactical concessions need to be made, it is very worthwhile."
On October 30, the Cavendish Trust Fund signed an agreement with Friends Provident Group to complete the acquisition of the fifth largest life insurance company in the UK for $2.85 billion in cash.
After completing this acquisition, Amber Sheehan, manager of the Cavendish Trust, stated that they would restructure Friendship Insurance Group to improve its profitability.
Friendship Insurance Group would also collaborate with DS Group to improve the insurance group's fund portfolio and achieve a turnaround in its investments.
Amber Sheehan also predicted that they would acquire at least two more insurance companies in the coming period, with Friendship Group's acquisition likely to be the smallest.
However, she declined to disclose the next acquisition target.