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Citigroup drops bid to block Wachovia acquisition but will press damages claim

[JURIST] Citigroup Inc. [corporate website] on Thursday announced [press release] that it would not seek to enjoin the acquisition of Wachovia Corp. by Wells Fargo & Co. [corporate websites] but would pursue claims against both financial institutions for alleged breach of contract and tortious interference with contract. Citigroup's decision to abandon negotiations to acquire a substantial portion of Wachovia operations clears the way for the $15.4 billion merger with Wells Fargo, which was proposed [Wachovia press release] last week. Citigroup said in a statement:

We are proud to have been part of an historic transaction that was supported by all of the federal banking agencies and the Secretary of the Treasury, after consultation with the President, and that we carefully designed to avoid systemic stress and to advance the interests of our shareholders....

Without our willingness to engage in this transaction, hundreds of billions of dollars of value would have been seriously threatened. We stood by while others walked away. Now, our shareholders have been unjustly and illegally deprived of the opportunity the transaction created.
Wachovia and Wells Fargo now face a lawsuit [complaint, PDF; press release] that Citigroup filed Monday in the Commercial Division of the Supreme Court of New York [official website], seeking $20 billion in compensatory damages and $40 billion in punitive damages from Wells Fargo for allegedly interfering with the Citigroup-Wachovia negotiations. Wachovia is also a defendant in that action for alleged bad faith breach of contract. Bloomberg News has more. The Charlotte Observer has local coverage.

The Citigroup announcement ends a litigation standstill [JURIST report] that the three financial institutions agreed upon Monday after a weekend of legal maneuvering. Wachovia and Citigroup reached an "agreement in principle" [Wachovia press release] last Monday providing that Citigroup would acquire Wachovia operations worth about $2.1 billion. As negotiations faltered, Wachovia announced Friday that Wells Fargo had offered to buy it as an intact company. Later that day, Citigroup brought suit against Wachovia in the New York Supreme Court, which on Saturday extended an agreement [press release] providing for exclusive negotiations between those parties. On Sunday, the same court's Appellate Division [official website] overturned that order. On Saturday, Wachovia filed a federal lawsuit [complaint, PDF] in US district court, requesting an order declaring the agreement with Wells Fargo "valid, proper, and not prohibited" by its agreement with Citigroup.

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