Wells Fargo wins Wachovia afterall

Wells Fargo wins Wachovia
Historic City News learned this morning that Wells Fargo and Wachovia have agreed to merge creating premier coast-to-coast financial services franchise without government assistance.

SAN FRANCISCO and CHARLOTTE, October 3, 2008 – Wells Fargo & Company (NYSE:WFC) and Wachovia Corporation (NYSE:WB) said today they have signed a definitive agreement for the merger of the two companies including all of Wachovia’s banking operations in a whole company transaction requiring no financial assistance from the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

Under the agreement, Wells Fargo will acquire all outstanding shares of common stock of Wachovia in a stock-for-stock transaction. In the transaction, Wells Fargo will acquire all of Wachovia Corporation and all its businesses and obligations, including its preferred equity and indebtedness, and all its banking deposits.

Under terms of the agreement, which has been approved unanimously by the boards of both companies, Wachovia shareholders will receive 0.1991 shares of Wells Fargo common stock in exchange for each share of Wachovia common stock. The transaction,
based on Wells Fargo’s closing stock price of $35.16 on October 2, 2008, is valued at $7.00 per Wachovia common share for a total transaction value of approximately $15.1 billion. Wachovia has almost 2.2 billion common shares outstanding. The agreement
requires the approval of Wachovia shareholders and customary approvals of regulators.

Wells Fargo will record Wachovia’s credit-impaired assets at fair value. The acquisition is expected to exceed Wells Fargo’s internal rate of return goal and add to Wells Fargo’s earnings per share in the first year of operations, excluding integration costs, writedowns, transaction charges, and credit reserve build. Wells Fargo expects to incur merger and integration charges of approximately $10 billion. To maintain its strong capital position, Wells Fargo intends to issue up to $20 billion of new Wells Fargo
securities, primarily common stock.

“We at Wachovia have great admiration and respect for the people and businesses at Wells Fargo and we are extremely pleased to join forces with this outstanding company,” said Robert K. Steel, President and CEO of Wachovia Corp. “Today’s announcement creates one of the strongest financial firms in the world and is great for all Wachovia constituencies: our shareholders, customers, colleagues and communities.

This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support. The market presence and composition of our businesses, along with our service-oriented cultures, are extraordinarily complementary
and this combination creates great potential for sustained stability and growth.”

“This agreement represents a compelling value for Wachovia shareholders,” said Wells

Fargo Chairman Dick Kovacevich. “It provides superior value compared to the previous offer to acquire only the banking operations of the company and because Wachovia shareholders will have a meaningful opportunity to participate in the growth and success of a combined Wachovia-Wells Fargo that will be one of the world’s great financial services companies. We are combining the industry’s number one ranking customer service culture of Wachovia with the industry’s number one sales and crossselling
culture of Wells Fargo. The best in service and the best in sales, an unbeatable combination. Wachovia shareholders also will benefit from holding the stock of a strong financial institution, the U.S. bank with the highest credit ratings and with a long
history of increasing dividends on its common stock. Wachovia’s brokerage and asset management businesses, which would have been left behind in the prior proposal, are tightly interwoven with Wachovia’s core banking business – and this agreement avoids
the complexity and unavoidable loss of value in trying to separate them, which would have disrupted Wachovia’s team members and customers. We also bring to this merger agreement our 157 years of experience in financial services and the unparalleled
convenience we can offer Wachovia customers through one of the most extensive financial services distributions systems in North America. We have the highest regard for the quality and commitment and caring of Wachovia team members. We believe
their demonstrated commitment to outstanding customer service and their highest standards of community leadership are identical to our own values. And, of course, this agreement won’t require even a penny from the FDIC.”

The combined company will have a strong presence in Charlotte, which will be the headquarters for the combined company’s East Coast retail and commercial and corporate banking business. St. Louis will remain the headquarters of Wachovia Securities. In addition, three members of the Wachovia Board will be invited to join the Wells Fargo & Company Board when the transaction is completed.

Kovacevich said “This agreement is an outstanding opportunity for Wachovia common and preferred shareholders and debt holders, team members and customers, for the Charlotte and St. Louis communities and indeed all of the communities that Wachovia serves, and for the U.S. government and our banking system. It makes compelling business and strategic sense and is simply an incredible fit that will result in an immensely strong, stable financial services company that will carry on Wachovia’s
proud tradition of being one of the very best financial institutions in the world.”

“We know this has been a time of great uncertainty for Wachovia team members and many of its customers as their company has gone through a very painful and challenging time of unprecedented change in our industry,” said Wells Fargo President and CEO John Stumpf. “We want to assure them we’ll do everything we can to make the integration of our operations as smooth as possible. An important measure of success for this integration will be our ability to retain as many of the talented Wachovia team members as possible so they can continue to provide outstanding service and financial advice to their customers and continue their careers with Wells Fargo.”

The combined company will be one of North America’s most extensive financial services distribution networks.

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