US Fed approves takeover of Wachovia by Wells Fargo

"The Federal Reserve Board on Sunday announced its approval of the application ... by Wells Fargo & Company, San Francisco, California, to acquire Wachovia Corporation and its subsidiary banks," the Fed said Sunday in a statement posted on its website.

The Fed’s approval, adopted by a unanimous board decision, follows Citigroup’s decision Thursday to end court efforts to block Wachovia’s merger with Wells Fargo.

Citi had tried to block the tie-up, claiming Wachovia illegally backed out of their own merger agreement and that Wells Fargo interfered with its exclusivity.

Wachovia, the fourth-largest U.S. bank by assets, with headquarters in Charlotte, North Carolina, faced a near collapse of its share price and weakening confidence because of its exposure to the subprime mortgage crisis.

The planned acquisition by Wells Fargo -- which traces its roots to the Wild West and the 19th century gold rush in California -- would give it the biggest network of branches in the United States.

In addition to the acquisition of Wachovia’s subsidiary banks, the Fed said in a statement, "Wells Fargo has requested the board’s approval ... to acquire the nonbanking subsidiaries of Wachovia, including Wachovia’s two subsidiary savings associations."

Wells Fargo, the Fed added, "also proposes to acquire the agreement corporation and Edge Act subsidiaries and the foreign operations of Wachovia."

The Fed said the two sides in the deal have 30 days to submit "views and recommendations" on the proposal.

Wells Fargo offered $15.1 billion in an all-stock deal to buy all of Wachovia, and recently stressed that its proposal did not have any government involvement or taxpayer risk.

Citigroup had offered to pay $2.16 billion in stock for Wachovia’s banking activities and some of its debts.

But the giant bank said Thursday it was ending court efforts to block the Wachovia-Wells Fargo merger, although it vowed to press legal charges against bank officials for breach of contract.

The battle for Wachovia was part of the great redrawing of the U.S. financial landscape as commercial and investment banks go bust or seek takeovers because of losses linked to the subprime housing market.

Wachovia had been in danger of failure after its shares lost more than 70 percent of their value in a year, as investors feared a panic run on the beleaguered institution.

Many thought the once fourth-biggest U.S. bank by assets would share the fate of its rival Washington Mutual, which was seized by the government and sold to investment bank JPMorgan Chase in one of the biggest-ever U.S. bank failures.

When the merger is complete, Wells Fargo estimates the combined bank will have $1.42 trillion in assets, $787 billion in deposits, 48 million customers, $258 billion in assets under management in mutual funds and 280,000 employees.