Citi Sues Over Wachovia - For $60bn!
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In a statement issued Monday, Citi said: 'The Citi / Wachovia transaction would have been signed as announced on Friday, October 3rd, if it had not been subverted by the unlawful conduct of Wachovia, Wells Fargo, and their officers and directors and outside advisers'. Citi is seeking $20bn in compensatory damages, and $40bn in punitive damages.
The US Federal Reserve has asked Citi and Wells Fargo to sort this matter out between them, believing that a lengthy league battle, and the uncertainty it will bring, will not be in the best interests of either Wachovia's shareholders, or the markets generally. Citi has made it clear, however, that, deal or no deal, it still intends to have its pound of flesh once the dust has settled.
In the meantime, there's all sorts of speculation about what a deal could look like. The Financial Times reports that one option apparently under discussion is a deal whereby Citi would take Wachovia branches in some states, and Wells Fargo would take the rest of the bank. A regional solution, on the other hand, could see Citi take Wachovia's branches in California, Florida and New Jersey.
And Bloomberg quotes Pershing Square Capital Management head William Ackman, who supports the break-up option. Speaking at the Value Investing Conference in New York on Monday, Ackman said: 'This company (Wachovia) is worth more, in our view, if it's broken into pieces. It's worth more because of the tax benefits created from the separation. It makes sense for Citi to continue buying the banking subsidiary, and it makes sense for somebody else to buy the holding company'.
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