UPDATE: Citi and Wells Fargo are now bidding for Wachovia, the NYT says. The Fed is resisting backstopping Wachovia’s assets. The takeover is expected to be at a few dollars a share, well below Friday’s $10 closing price.
EARLIER: Citi (C) execs are meeting to discuss buying Wachovia (WB), CNBC’s Charlie Gasparino reports. Charlie says the deal depends on whether the feds will backstop Wachovia’s mountain of bad debts. The press leak, meanwhile, is presumably in part an attempt to plant this seed and build support for such a bailout.
We can now presumably assume that, if the feds DON’T agree to backstop a deal–and soon–Wachovia will probably go to zero. Why would Banco Santander, Wells Fargo, or any other suitor step up if Citi has already tested the bailout waters and been denied?
(That said, if we had to bet, we think the newly bailout-happy Treasury will backstop this one, perhaps as part of the forthcoming $700 billion bailout deal).
Senior executives of Citigroup are expected to meet Sunday to discuss a possible acquisition of the Wachovia in what people close to the talks describe as advanced merger discussions between the two big banks, CNBC has learned.
People with knowledge of the discussions say the talks could break down at any time; Citigroup’s interest largely hinges on whether the firm will received federal help to buy Wachovia, which has around $120 billion of bad debt on its balance sheet.
But if the feds lend a hand to help Citigroup dispose of these soured assets, people close to the firm say Wachovia is an attractive takeover target. Wachovia, based in Charlotte, NC, has $400 billion in deposits and is one of the nation’s fourth largest bank according to assets.
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