Citigroup-Wachovia-Wells Fargo

HARVARD LAW SCHOOL

HLS 10-03

REV: JUNE 10, 2010

GUHAN SUBRAMANIAN NITHYASRI SHARMA

Citigroup-Wachovia-Wells Fargo

Shortly after 2:00 am on Friday, October 3rd, 2008, Vikram Pandit, CEO of Citigroup, received a phone call at his home. Normally Pandit wouldn’t answer his phone at this hour, but these were no ordinary times, and the caller was no ordinary person. Robert Steel, CEO of Wachovia, was on the line. “We cut a new deal,” Steel said simply.1 Pandit was floored. Just a few days earlier, Citigroup had entered into an exclusive, week-long negotiating period to reach a deal to acquire Wachovia. Citigroup had even extended Wachovia a line of credit to keep the bank alive for the week while they negotiated.2 But at 9:00 pm on Thursday night, Wells Fargo made an offer to acquire Wachovia for $7.00 per share in Wells Fargo stock, and at 11:00 pm, the Wachovia board had met by conference call and accepted it. Pandit sprung into action. He notified his board and summoned the troops to the offices of Davis, Polk & Wardwell, Citigroup’s outside counsel, in midtown Manhattan. “Come on in,” he told one top executive, without elaborating.3 The Citigroup board and top officers had been “running on fumes” all week, trying to seal the deal with Wachovia before its week-long exclusivity expired. One executive was so groggy from lack of sleep that he forgot his corporate ID card when he showed up at Davis Polk’s offices at 450 Lexington Avenue.4 The assembled group lent new meaning to Citigroup’s motto: “Citi never sleeps.” The Citigroup board and top officers set up an impromptu war room at Davis Polk. Everyone was stunned, and furious. If they were just going to go with someone else, "why would [Wachovia] be wasting time getting to that level of detail?” one commented.5 Another Citigroup official was more blunt: “What has transpired here is complete moral irresponsibility.”6 The Wachovia-Wells Fargo deal went across the newswire. When the markets opened on Friday,...