Citi gets judge to halt Wachovia, Wells Fargo deal

CNN:

A New York State judge has temporarily blocked the merger of Wachovia with Wells Fargo, according to a news release by Citigroup - which is trying to buy Wachovia itself.

New York State Supreme Court Justice Charles Ramos issued the order late Saturday, saying that Citigroup and Wachovia must appear before him on Friday, Citigroup said, adding that the order was granted over the objection of Wachovia.

Wachovia spokeswoman Christy Phillips-Brown said in a statement the company believes its agreement with Wells Fargo is "proper, valid and ... in the best interest of shareholders, employees and the American taxpayers," the Associated Press reported. She said Citigroup is free to make a better offer to Wachovia under that agreement.

Citigroup (C, Fortune 500) has been pressing Wachovia (WB, Fortune 500) and Wells Fargo (WFC, Fortune 500) to abandon their merger plans, arguing that it had entered into an exclusivity agreement with Wachovia.

In a deal struck last Monday with the assistance of the Federal Deposit Insurance Corporation (FDIC), Citigroup had offered to take over the Charlotte, N.C.-based bank for $2.2 billion.

But four days later, Wells Fargo said it was buying Wachovia.

Unlike Citigroup's $2.2 billion all-stock offer for Wachovia's banking business, Wells Fargo would absorb all of Wachovia's assets, including its vast deposit network, massive brokerage business and investment management division.

The Wells offer is worth approximately $15.1 billion.

Citigroup may have a legitimate claim to challenge the Wells Fargo deal. A copy of the exclusivity agreement between Citigroup and Wachovia obtained by CNNMoney.com reveals that Wachovia had agreed not to seek out another bidder, nor to provide information or enter talks that might facilitate a rival bid.

...

This has the makings of the Pennzoil-Texaco type case. In that case Pennzoil prevailed against Texaco which had swooped in and took a deal they had already agreed to with another oil company. Perhaps Citibank may want to bring in Joe Jamail who won the record verdict against Texaco. From the numbers given it appears like the Wells Fargo deal is clearly the better deal for shareholders and maybe even for the depositors, which could make this a very interesting case.

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