While the tug-of-war between Citigroup (NYSE: C ) and Wells Fargo (NYSE: WFC ) over Wachovia (NYSE: WB ) isn't over just yet, the two have agreed to stop suing the pants off of each other -- at least until noon Wednesday -- so something can get hammered out before Wachovia croaks.
Did you miss the past few episodes of Days of our Banking Lives? Here's a recap:
After Citigroup's $1-per-share bid for Wachovia's banking assets (backstopped by the government) was crushed by Wells Fargo's $7-per-share offer for all of Wachovia (with no backstop), Citigroup successfully pushed to have a court halt Wells Fargo's bid. Wells Fargo had that ruling overturned Sunday.
That's when things got really out of hand. Citigroup -- apparently trying to exploit people's fascination with large numbers after the $700 billion bailout -- tried to sue both Wells Fargo and Wachovia for upward of $60 billion -- yep, with a "b." The suit sought more than $20 billion in compensatory damages and more than $40 billion in punitive damages.
You're right, it's completely absurd. Citigroup offered to buy Wachovia for a little over $2 billion, yet it felt it deserved 30 times that amount after Wells Fargo had the nerve to offer to pay shareholders what they deserved and also let taxpayers off the hook. What's ironic about the whole thing is that if Citigroup truly feels it's out tens of billions of dollars, it's clearly admitting that the $2 billion it offered was a pittance of what the company is actually worth to shareholders.
Thank goodness, the two have agreed to halt the sue-fest and can use the 48-hour truce to try to settle on a deal for Wachovia. Will it work? My guess is that Citigroup can't afford to compete with Wells Fargo's bid, so legal technicalities are about all it can rely on. Things should stay interesting over at least the next day or two.
No matter what happens, Wachovia is the real winner here. While the past year has been headlined with last-minute bargain bids and bailouts, Wachovia has the pleasure of being fought over, which should leave shareholders in a much better spot than the fire-sale tactics we're become so used to.