The Federal Deposit Insurance Corp. rejected a last-minute pitch by Wachovia Corp. to remain independent hours before forcing it to sell itself, according to proxy materials filed Friday in conjunction with its pending sale to Wells Fargo & Co.
In the early hours of Sept. 29, Wachovia executives approached the FDIC with a plan that would have included a loss-sharing agreement on a designated loan portfolio in exchange for selling an equity stake to the regulator. The $764.4 billion-asset Charlotte company also proposed raising $10 billion of capital, according to a filing with the Securities and Exchange Commission.
FDIC Chairman Sheila Bair told Robert K. Steel, Wachovia chief executive, that "the FDIC had determined" Citigroup Inc. would buy Wachovia's banking units," the filing said. Wachovia and Citi announced the deal that morning, but days later Wells offered to buy the entire company. That deal is expected to close next month. The filing also said Wachovia's board had agreed as early as a Sept. 16 meeting to "remain open" to selling a stake of 20% to 40% to an outside investor, as well as selling the entire company. The board had also decided to "seriously" consider selling core assets and raising $10 billion to $15 billion of capital.
Wachovia went as far as holding preliminary discussions with potential investors to prepare for a public offering planned for the week of Sept. 22, the filing said, but it scuttled those plans after market conditions worsened, its stock price fell, and deposits began to run off. An FDIC spokesman said he would not discuss an "open and operating institution." Neither Citi nor Wachovia would discuss the filing. Wells also declined to comment.