Chapter 630: Initial layout

Wachovia Bank was once the fourth largest bank in the United States, headquartered in Charlotte, North Carolina. In 2007, its total assets were as high as US$783 billion.

Because of the financial crisis caused by subprime mortgages, many banks fell into operational difficulties, including Wachovia Bank.

It was not Wells Fargo that was initially prepared to acquire the bank, but Morgan Stanley. As early as the end of August this year, there was news that Morgan Stanley was considering merging with Wachovia and several other banks. matters.

Then on September 15th, Citigroup joined in. They announced that they had reached an in-principle acquisition agreement with Wachovia, the former fourth largest commercial bank in the United States, with the assistance of the Federal Deposit Insurance Corporation (FDIC) - Citigroup The group agreed to acquire Wachovia's banking business for US$2.16 billion in stock, including assuming US$53 billion in liabilities from Wachovia Bank.

At that time, Citigroup's agreement to acquire Wachovia Bank had been approved by the boards of directors of both parties, but the final agreement still required a vote by Wachovia Bank's shareholders, and the deadline for voting was December 31, 2008.

Just when the market generally believed that Citigroup's acquisition of Wachovia Bank was inevitable...

On October 3, Wells Fargo suddenly announced that it would acquire Wachovia Bank in the form of a stock exchange for a consideration of US$15 billion.

And after completing the acquisition of Wachovia Bank, they will also invite three Wachovia Bank directors to join the Wells Fargo Board of Directors and publicly issue new shares worth US$20 billion to raise funds.

According to information obtained by Barron's, Wells Fargo only joined the pursuit of Wachovia after learning of Citigroup's acquisition plan.

It is worth mentioning that the Federal Reserve issued a public statement on October 3 noting Wells Fargo’s new proposal—the statement indicated that Wells Fargo’s proposal has not yet been reviewed and that regulators will work to achieve protections for all Wachovia banks. creditors and promote market stability outcomes.

The statement also noted that Citigroup's proposal is under review by the Federal Reserve and OCC.

On October 4, Citigroup, which had been "poached", filed a lawsuit against Wachovia Bank and Wells Fargo Bank in anger, seeking temporary restraining orders, preliminary and permanent injunctive relief, specific performance of exclusive agreements, and punitive damages.

But on October 5, Wachovia Bank was not afraid at all. They filed a motion for a temporary restraining order to prevent Citigroup from taking any measures to interfere with the implementation of the merger agreement between Wachovia Bank and Wells Fargo Bank.

Fed representatives sought to facilitate negotiations between Wachovia, Citigroup and Wells Fargo amid concerns that Citigroup's and Wells Fargo's competing legal claims could themselves have destabilizing effects on the institutions, Wachovia and the banking system as a whole. to resolve their differences.

To give those discussions time to continue, Fed officials are involved in talks to facilitate a ceasefire or halt to litigation between the three companies.

Finally, on October 6, the parties finalized a standstill agreement—under which Wachovia, Citigroup, and Wells Fargo agreed to suspend all formal litigation activity, including discovery, for two days and otherwise cooperate to maintain The status of any litigation…

Later, the agreement was extended to October 10.

As a result, on October 9, Citigroup announced the termination of negotiations with Wells Fargo on the Wachovia transaction - Citigroup stated that it would not block the merger between Wells Fargo and Wachovia.

On October 10, the U.S. federal antitrust regulator approved Wells Fargo’s acquisition plan for Wachovia Bank.

On October 12, the Federal Reserve immediately gave the green light to the transaction.

After the merger is completed, Wells Fargo will receive US$448 billion in bank deposits from Wachovia Bank. It announced that after the merger of the two companies, its business scope will cover 10,761 regions in 39 states in the United States.

In fact, the Federal Trade Commission of the United States was supposed to complete the review before the end of the 30-day review period, but it chose to speed up the approval; the Federal Reserve also quickly shortened the review period and approved the transaction, so that the transaction was completed within 5 days.

In this transaction, it is worth mentioning that Wells Fargo will calculate Wachovia's non-performing assets at fair value. This also shows that Wells Fargo's asset position is very strong and can cope with the asset write-downs that must be made after acquiring Wachovia. This was the main reason why Wells Fargo ultimately won the competition with Citibank to acquire Wachovia Bank.

After reaching this acquisition agreement, Wells Fargo then announced that it was preparing to transfer Wachovia's problematic assets to its own balance sheet at a cost of US$10 billion, and at the same time issue US$20 billion of common stock to improve its assets. Balance sheet position.

It was at that time that the BFT Fund began to approach and negotiate with Wells Fargo to purchase these common shares.

So far, Barron has invested in Goldman Sachs Group, Morgan Stanley, JPMorgan Chase and Wells Fargo through IC Capital and BFT (British Fortune Times) funds.

Among them, JP Morgan Chase and Wells Fargo will alternate between being the largest banks in the United States in the future...

And it used Standard Chartered Bank to acquire Merrill Lynch Group to form Standard Chartered-Merrill Lynch Group.

He took advantage of the subprime mortgage crisis to basically complete his plans for American commercial banks and investment banks.

However, the US stock market has not fallen to the point yet, and the stock prices of most companies still have more than three months of decline.

Therefore, although the Black Swan Fund has extracted part of the profits from shorting the subprime mortgage crisis, its shorting has not ended yet.

…

“For Friends Provident Insurance Group, it is nothing more than a question of acquisition price. Our last offer was considered insincere, and according to our analysis, their board of directors’ psychological expectation is more than $3 billion…”

Under Barron’s instructions, Amber Sheen did not lower the acquisition price to the lowest through continuous negotiations, but instead took into account the efficiency of the acquisition…

He said to Barron:

“Although I think that below $2.7 billion can completely force the other party’s board of directors to succumb to the pressure of shareholders, it is indeed as you said that if time drags on, it is easy to attract the attention of other insurance giants, such as Prudential Group…”

“And in the final analysis, acquiring Friends Provident Insurance Group is not our ultimate goal, but just one part of all plans, and it is not appropriate to spend too much time on it.”

Barron said:

“In most cases, in order to achieve strategic goals, even if tactical concessions are required, it is very worthwhile.”

On October 30, Cavendish Trust Fund and Friends Provident Group (Friends Provident Group) signed a strategic cooperation agreement. Group) signed an agreement to complete the acquisition of the fifth largest life insurance company in the UK for $2.85 billion in cash.

After completing this acquisition, Amber Sheehan, the manager of Cavendish Trust Fund, said that they will reorganize Friendship Insurance Group to improve its profitability.

And Friendship Insurance Group will cooperate with DS Group to improve the investment portfolio of the insurance group's funds and complete the turnaround of its investment.

And Amber Sheehan expects that they will acquire at least two more insurance companies in the future, and the acquisition of Friendship Group may be the smallest among them.

But he refused to disclose the next acquisition target.