Wachovia Merger Called off Sold to citigroup as Buyout

Another bank went down in USA today. Wachovia's merger talks failed and finally called off. Wachovia held advanced merger discussions with both Citigroup and California-based Wells Fargo & Co. (NYSE: WFC) late Sunday.

However in the recent development, Citigroup said it willbuy off Wachovia for $2.1 billion. The sale will include Wachovia's retail bank, corporate and investment bank and wealth management businesses.

Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb any losses beyond $42 million. Wachovia is one of the ill operated banks post-sub prime crisis and was always on the cards to go down the hill. This news is really not a surprise for most people including investors atleast they can hope Citigroup can revive wachovia in a good way.

Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk. Citigroup will pay about a $1 a share for Wachovia.

According to the FDIC, Citigroup will acquire the bulk of Wachovia's assets and liabilities, including five depository institutions and assume Wachovia's senior and subordinated. Wachovia (NYSE: WB) will continue to own Wachovia Securities and Evergreen Investments.