NEW YORK • The battle for control of troubled bank Wachovia tilted toward Wells Fargo Sunday as a state appeals court blocked a lower court ruling that had favored rival bidder Citigroup.
At stake is the $339 billion in Wachovia deposits and its network of more than 3,300 branches throughout the country that would solidify the winner as being in the top tier of U.S. retail banking.
In the Sunday night ruling, the Appellate Division of State Supreme Court threw out an order by Justice Charles Ramos issued late Saturday at the request of Citigroup; the order would have extended the time under which Wachovia and Citigroup had to complete their deal.
Citigroup, which announced on Sept. 29 that it had received federal government backing to acquire the banking assets of Wachovia Corp. for $2.1 billion, or the equivalent of about $1 a share, said it would appeal.
The fight was also waged in federal court, where Wachovia asked U.S. District Judge John Koeltl to declare invalid part of the Citigroup deal that would have restricted Wachovia from considering competing bids.
With both Wells Fargo and Citigroup vowing to press their legal rights to a deal with Charlotte, N.C.-based Wachovia, analysts warned that a prolonged takeover fight carries enormous risk at a time when the nation’s financial system is under the worst stress since the Great Depression.
“I would hope there would not be a long battle because that does not bode well for Wachovia’s existing business,” said Ben Halliburton, chief investment officer at Tradition Capital Management in Summit, N.J.
Wachovia is among the banks whose billions of dollars in losses from bad mortgage bets ultimately led to the government’s $700 billion plan to buy bad assets from banks and other institutions to shore up the financial industry.