Wells Fargo & Co., which has agreed to buy Wachovia Corp., asked a federal court to void Citigroup Inc.’s earlier agreement to buy parts of the big North Carolina lender.
In a complaint filed Tuesday with the U.S. district court in Manhattan, Wells Fargo said the earlier agreement is unenforceable under the government’s $700 billion banking industry bailout because it is “contrary to public policy.”
Wells Fargo asked for a ruling that the Citigroup agreement is unenforceable to the extent it may have prohibited Wachovia from considering another merger offer, and to bar damages premised on the idea that the agreement could be enforced.
Citigroup has said it will seek up to $60 billion of compensatory and punitive damages from Wells Fargo and Wachovia, alleging breach of contract and tortious interference with contract.
“This new lawsuit adds nothing to the issues already joined by the parties in court,” Citigroup spokesman Mike Hanretta said. “Citigroup believes strongly that the deplorable conduct of Wachovia and Wells Fargo here gives rise to substantial legal liability, and we look forward to contesting this case fully and vigorously.”
Wachovia spokeswoman Christy Phillips-Brown declined to comment.
San Francisco-based Wells Fargo agreed on Oct. 3 to buy Charlotte, North Carolina-based Wachovia’s banking, investment and insurance operations in an all-stock takeover originally valued at $15.1 billion.
Four days earlier, New York-based Citigroup had agreed to pay $2.16 billion for Wachovia’s retail and investment banking units only, but not its brokerage, insuance or asset management arms.
That agreement also called for Citigroup to absorb up to $42 billion of loan losses from Wachovia, which has been hurt by exposure to mortgages. The Federal Deposit Insurance Corp would have absorbed further losses in exchange for $12 billion of Citigroup preferred stock and warrants.
Wells Fargo’s agreement envisions no government help. Analysts have said Wachovia, which operates mainly in the eastern half of the United States, is a strong fit for Wells Fargo, which operates mainly in the western half.
A merger of Wells Fargo and Wachovia would create the nation’s fourth-largest bank, with more than $1.4 trillion of assets, close to $800 billion of deposits, about 6,600 branches, 48 million customers and 280,000 employees.
(Editing by John Wallace)