Citi, Wachovia, Wells Fargo: Financial Menage A Trois

While Citi appears ready to fight in court, the Wells Fargo bid is superior for shareholders, tax payers, and clients alike (WSJ2, WSJ2). Much as the FDIC wants to see the Citi deal completed, it will be difficult for them to ignore the interests of these constituencies. Citi could try to counter Wachovia's bid, but it isn't clear whether the company has the financial resources or risk appetite to do so. It appears that Citi's greatest hope is to wrangle some sort of damages out of Wells Fargo.

The acquisition agreement between Wachovia and Citi says that Wachovia is banned from having negotiations with anyone else relating to an acquisition proposal. The contract does not specify what the penalty for engaging in these discussions might be, nor what effect they might have on Citi, so it may be a challenge for Citi to prove in court it deserves any compensation.