NEW YORK --- A battle broke out Friday for control of Wachovia, as Wells Fargo agreed to pay $14.8 billion for the struggling bank, while Citigroup and federal regulators insisted Citi's earlier and lower-priced takeover offer go forward.
The surprise announcement that Wachovia Corp. agreed to be acquired by San Francisco-based Wells Fargo & Co. in the all-stock deal -- without government assistance -- upended what had appeared to be a carefully examined arrangement and caught regulators off guard.
Wells' original offer totaled about $15.1 billion, but because the value of its shares closed down 60 cents Friday, the deal is now valued at about $14.8 billion. Four days earlier, Citigroup agreed to pay $2.1 billion for Wachovia's banking operations in a deal that would have help from the Federal Deposit Insurance Corp. The head of the FDIC said the agency is standing behind the Citigroup agreement but that it is reviewing all proposals and will work with the banks' regulators "to pursue a resolution that serves the public interest."
Citigroup, which demanded Wachovia call off its deal with Wells Fargo, said its agreement with Wachovia provides that the bank won't enter into any transaction with any party other than Citi.
Barring legal action, Wachovia's future will be determined by the bank's shareholders and regulators, which have to approve a final deal. It was clear which shareholders preferred Friday, as Wachovia shares climbed as high as 80 percent.
The Federal Reserve, which has regulatory oversight of the three big banks, said it hasn't had time to review the proposed sale to Wells Fargo but that it will work to ensure all creditors and depositors of Wachovia are protected.
The Fed said regulators will be working with Wachovia and Wells Fargo "to achieve an outcome that protects all Wachovia creditors, including depositors ... and promotes market stability."