Was $2.16 billion the best deal for Wachovia?

[Jane Eyre]

Source: The Charlotte Observer

Did Wachovia chief executive Bob Steel get the best deal? Did he have a choice?

With the Charlotte bank set to sell most of its operations to Citigroup for $2.16 billion, some employees and shareholders are wondering why the once vaunted institution is selling for a relatively paltry sum, even amid a global credit crisis.

For what it's paying, New York-based Citi gets $700 billion in assets and more than $400 billion in deposits, but it's also on the hook for $42 billion in potential loan losses. The Federal Deposit Insurance Corp. will cover any losses beyond that. Left behind will be a company called Wachovia that houses brokerage and asset management businesses.

For Steel's part, he may have been forced into a marriage by regulators in a bid to avoid “serious adverse effects” on the economy and the financial system, as the Federal Deposit Insurance Corp. said Monday. The FDIC took over the sale process Sunday after San Francisco-based Wells Fargo passed, the Wall Street Journal reported Tuesday.



Read more: http://www.charlotteobserver.com/business/story/224380.html

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There's a lot here that bears further scrutiny. Was Wachovia stock undervalued at $1 per share? Did the stockholders - and the city of Charlotte - get screwed over in this deal? Just what was Bob Steel's role, and was he working in the interest of the company's stockholder's and customers or was he still acting as an agent of the US Treasury Department (the position he left in July to become the new Wachovia CEO)? And will the Wachovia stockholders find a way to have their say in this deal yet?

[tismyself]

1. if I remember right

Wachovia recently told a buyer or some buyers plural "no" - and the prices then were quite a bit higher.

I think the only time Charlotte got screwed over with the banks is when they put all their damned eggs in the bank baskets in the first place. I mean, for God's sake. What else is Charlotte known for but cheap real estate for out of state bankers to relocate to.

[Zynx]

2. Wachovia would have failed on its own. No question about it. You know what the failure

price for a bank is?

[tismyself]

3. I'm waiting

for BofA to go toes up.

[Lucky Luciano]

4. BoA OK so far...their CDS has been very stable through all of this.

Watching teh CDS quotes that I get on the various banks etc, I was able to see that WM and WB were very likely to be bagels...and they were.

[Zynx]

6. Every indication is that they're fine.

[Lucky Luciano]

5. Bummer for Steel...

He just took over the job a few months ago and inherited a very difficult task. After assuming the CEO role, he bought over one million shares for around $17 per share!

[defendandprotect]

7. Fire sale prices...like S&L theft & embezzlements --- again --

[htuttle]

8. $700 billion in assets + $400 billion in deposits - $42 billion potential loses = ?

$2.16 billion?

Is my math wrong, or are lot of those 'assets' actually vaporware?

[Lucky Luciano]

9. Valuations methodology just highly flawed/

It is much harder than that. It is certainly not a $258B market cap company.

[tinymontgomery]

10. Some of the big wigs

are walking away with 12 to 20 million in severance pay. They should be thrown in jail.