Now we know why Wachovia chief executive Robert Steel didn’t wait until the exclusivity agreement with Citi expired before he inked a deal with Wells Fargo: he believed the FDIC was going to place Wachovia into receivership if it didn’t get a deal done by Friday.
In the exclusivity agreement signed up last week between Wachovia and Citi, Wachovia agreed not to negotiate with competing bidders for one week. A few days later, however, Wachovia signed a merger agreement with Wells Fargo. This clearly violated the terms of the exclusivity agreement, leaving many to wonder why Wachovia didn’t “slow walk” negotiations with Citi and wait for the exclusivity period to expire. Why the rush to break the deal with Citi?
In an affidavit made to the federal courts, Robert Steel has now revealed why the Wells Fargo deal was fast-tracked. Earlier in the week he had been under pressure to have a definitive agreement by Monday, October 6th—the day the Citi exclusivity agreement expired. And by Thursday night, he believed the FDIC was threatening to put its banking operations into receivership if a “definitive merger agreement” wasn’t signed up by Friday.