Wachovia announced today that it intends to sell its retail bank, corporate, and investment bank, as well as its wealth management businesses to Citigroup. Wachovia Corporation will remain a public company with two main operating subsidiaries – Wachovia Securities, the nation’s third largest brokerage firm, and Evergreen Asset Management – the bank said in a press statement.
“During recent weeks, the financial landscape has changed significantly and presented us with unprecedented challenges,” said Robert K. Steel, CEO and president of Wachovia. “Today’s announcement is the best alternative for the company,” Steel explained.

Under terms of the transaction, Citigroup will pay $2.1 billion, or about $1 per share, to Wachovia and assume the $53 billion in senior and subordinated debt of Wachovia Corporation. The acquisition will give Citigroup 9.8 percent of U.S. market deposit share, and total deposits globally of $1.3 trillion.
Working through the weekend to engineer the deal, federal regulators agreed to provide Citigroup with a financial guarantee on Wachovia’s risky mortgage assets – an arrangement similar to the one forged with JPMorgan Chase when it took over Bear Stearns earlier this year. Under the agreement, Citigroup will assume the first $42 billion in mortgage-related losses. Citigroup will pay the Federal Insurance Deposit Corporation (FDIC) $12 billion in preferred stock and warrants to absorb all losses beyond that amount.
In a statement released early this morning, Treasury Secretary Henry Paulson said he commended action taken by the FDIC and its chairman Sheila Bair for facilitating the sale in a way that mitigated potential market disruption. Paulson said the failure of Wachovia would have posed yet another significant risk to the U.S. financial system. “The FDIC’s actions help to mitigate potential systemic risk … in this period of market stress, we are committed to taking all actions necessary to protect our financial system and our economy,” Paulson said.
The transaction is expected to close before year-end. It has been approved by directors of both companies, but is subject to Wachovia’s shareholder approval and standard regulatory approvals.