Updated from 10:36 a.m. EDTWells Fargo ( WFC) said Friday it has reached a definitive agreement to acquire Wachovia ( WB) for $15.1 billion, but Citigroup ( C) was threatening legal action to preserve a federally backed deal it had reached Monday . In a statement Friday, Wells Fargo and Wachovia said the transaction requires no financial assistance from the Federal Deposit Insurance Corp. or any other government agency. Just days ago, Citigroup reached an arrangement to purchase all of the banking subsidiaries of Wachovia for around $2.2 billion, but the deal was being done with aid from the FDIC. Wachovia didn't offer a great deal of comment on the pact with Citi, which for now at least appears to be dead. It did say it "had been negotiating with Citigroup to complete a transaction supervised by the FDIC that included assistance from the government." From the outset, the FDIC had stressed that Wachovia didn't fail. Failures of IndyMac and Washington Mutual in recent months led to government seizures and subsequent sales of the bulk of their banking operations, but in the case of Wachovia, the government was described more as a facilitator. The board of Wachovia approved Wells Fargo's offer Thursday night. Citi said in a statement that the Wells Fargo deal constituted a "clear breach of an exclusivity agreement" Wachovia had entered with Citi and demanded a halt to the new transaction. "Citi was negotiating in good faith and nearly completed the definitive agreements required to consummate the Citi/Wachovia transaction that was announced on Monday," the bank said in a statement. "The value of the Citi agreement to Wachovia shareholders was substantially in excess of Wachovia's closing price on Thursday, Oct. 2. Citi has also been providing liquidity support to Wachovia Bank since Monday's announcement." Wells Fargo and Wachovia danced around the issue on a conference call Friday. "We think that this deal is solid," Wells Fargo Chairman Dick Kovacevich said. "We're not aware of any merger agreements that had been consummated at the time
Additionally, Citi had been planning to raise $10 billion in common stock and cut its quarterly dividend in half to 16 cents a share, but at this point, it wasn't known if those strategies would still be pursued. The biggest Wells Fargo shareholder is Warren Buffett's Berkshire Hathaway ( BRK-A), which itself has been on a buying spree of late. Berkshire recently made big investments in two other firms, Goldman Sachs and General Electric ( GE), the latter of which has a significant financial operation. The end of Wachovia's days of independence continues a string of buyouts and bailouts that have radically transformed the financial sector in the past few months. Along with the takeouts of Bear Stearns and Washington Mutual, Lehman Brothers filed for bankruptcy, the government arranged backstops for Fannie Mae ( FNM), Freddie Mac ( FRE) and AIG ( AIG), Bank of America ( BAC) agreed to buy Merrill Lynch ( MER), and roughly a dozen smaller banks have failed outright. To attempt to stem the crisis, the Bush administration has proposed a multibillion rescue package for the financial group. On Monday, the House of Representatives voted down the plan, but two days later a measure passed the Senate. The House will hold a new vote on Friday to try to get legislation put in place. A combined Wells Fargo and Wachovia will have assets of $1.42 trillion, deposits of $787 billion, and assets under management, through mutual funds, of $258 billion. Together, the companies have more than 10,000 banks in 39 states and Washington, D.C., 12,000 ATMs and 280,000 employees. For Wells Fargo, the acquisition will give it a first-time banking presence in several states along the East Coast and in the South, including Alabama, Connecticut, New York, New Jersey, Tennessee and North Carolina.