United States Bank Mergers & Acquisitions (American Express)

Photo: American Express offers a number of credit cards that are affiliated with airline loyalty programs, like this American Express Canada's AeroplanPlus card that earns rewards on Air Canada and other Star Alliance airlines.

American Express Company

As a financial services company, American Express is a curious one. Most people immediately associate the name with its namesake credit cards and travellers cheques. It also arranges travel for corporate clients and offers savings and travel insurance products.

Back in the 1830s, the western frontier of the U.S. was wild, lawless, and undeveloped in many aspects. The U.S. government postal service (USPS) was extremely limited, slow and unreliable. Nothing larger than a letter-sized envelope could be handled by the USPS. Many states west of the Eastern Seaboard were not covered by USPS at all. Yet the ever-expanding western frontier needed a delivery system for mail, parcels, currency, precious metals, consumer goods and industrial tools to be transported across the continent. This demand created opportunities for adventurous entrepreneurs to fill the gap that USPS could not provide.

Unbeknownst to many, the American Express Co. and Wells, Fargo & Co. share a common origin. In 1841, Vermont native Henry Wells established the Wells & Co. to provide express delivery service between New York City and the upstate Great Lakes port of Buffalo. The express delivery business in the 1840s was new and risky, but potentially highly profitable. One of Wells & Co.’s many rivals was Livingston, Fargo & Co., headed by Crawford Livingston and William G. Fargo. In 1849 yet another new competitor arrived: John Butterfield’s Butterfield, Wasson & Co.

In 1850, recognizing they could operate far more efficiently and expand coverage by combining, Messrs. Wells, Fargo and Butterfield consolidated their businesses into a joint-stock express association named the American Express Company. The new firm offered delivery service in the U.S. Northeast and the Midwest states of Illinois, Ohio and Iowa. In 1851, it signed an agreement with its arch-rival Adams & Co. (Adams Express Co. as of 1854) to split the market that probably would be considered as collusion today. American Express was to focus on the market north and west of New York state, whereas Adams would be free to expand in the U.S. Southeast.

Foreseeing the great potential of the massive migration of people to the Pacific Coast, Henry Wells and William G. Fargo soon proposed expanding American Express’ service to California, but the other directors balked at the risky move. Undaunted and determined, Mr. Wells and Mr. Fargo left American Express and New York for San Francisco to launch their own Wells, Fargo & Co. in 1852, offering gold trading (gold dust, bullion and coins), safekeeping as well as delivery services.

In 1857, the American Express Co. created the Overland Mail Co. as a joint-venture with rivals Wells, Fargo & Co., Adams Express and United States Express. One year later, the Overland Mail Co. won a USPS contract to carry mail over the southern Great Plains between St. Louis and California. Wells, Fargo & Co. eventually became the sole owner of Overland Mail Co. in 1866.

Rather than disrupting business, the American Civil War between 1861 and 1865 was ironically highly profitable for the express industry. American Express shipped military and other supplies to army depots, mail and parcels between soldiers and their families, and even delivered election ballots during the Union-Confederacy struggle.

The Big Four express companies’ good times came to an abrupt end in 1867, when a group of powerful New York merchants founded the Merchants Union Express Company to break the oligopoly. Competition became so fierce that American Express suffered its first ever annual loss in that year. The next year, American Express and Merchants Union Express merged to form the American Merchants Union Express Co., though the name was reverted back to American Express in 1873.

American Express began transporting goods from New York City to over a dozen major European cities in the 1870s, marking the company’s first international operations. The 1880s and 1890s saw the launch of the money order and travellers cheque products. Even though the U.S. postal money order had been available since 1864, its use was hindered by the relative ease of altering the face value. In 1882, American Express created its version of the money order that was safer, simpler and cheaper than the postal money order. The new product became a major new source of revenue for the company.

In the 19th century, American tourists and businessmen faced great inconvenience if they wanted to obtain local-currency cash while visiting Europe. They must first bring with them a letter of credit from their American home bank, and then visit the American bank’s European correspondent bank office, which would verify the letter of credit and release payment. The service was severely restricted by where the correspondent bank had offices and their banking hours. As can be imagined, even with much pre-planning, significant delays in obtaining cash were unavoidable. To make the process less cumbersome, American Express invented the travellers cheque in 1891. The travellers cheque can be easily and immediately cashed and converted to a local currency at American Express’s offices in Paris (opened in 1895) and London (1896). Soon, more offices opened in Antwerp, Zurich and Berlin. Holders simply love its simple and effective “signature and counter-signature” security feature. And if lost or stolen, the travellers cheques can be cancelled and replaced at any American Express office.

Before long, American tourists were flocking to American Express’ offices in Europe not just to cash their travellers cheques, but to obtain information about local attractions and hotels. Still, at this time, the travel advice provided was informal, and only for its travellers cheque clients. The company’s official entry into the travel agency service only began in 1915. Within several years, the name American Express became synonymous with luxury travel around the world.

The firm gained a legendary reputation for dependability at the outbreak of World War I in 1914, when some 150,000 American tourists were stranded in Europe, their American letters of credit suddenly becoming useless when war-time European banks refused to honour them. Words soon spread that American Express was accepting the letters of credit and dispensing cash to the stranded tourists. Thousands flocked to their offices to obtain cash to buy passages back to America.

American Express’ entry into the travel and selective banking business proved to be a saviour when its domestic express delivery business was nationalized in 1918 by the U.S. government as a war measure. By the Roaring Twenties, American Express’ offices had expanded to Argentina, Brazil, Japan, China, Hong Kong, India and Egypt, Turkey, Greece, Italy, Switzerland and Belgium, providing payment, banking and travel services for the high net-worth clientele.

American Express' autonomy was temporarily suspended in 1929 when it was disclosed that Chase Securities Corp, a subsidiary of Chase National Bank (forerunner of J.P. Morgan Chase & Co.) had quietly bought up 97% of American Express' outstanding shares. Chase was eyeing American Express’ prized banking licences and operations around the world. Interestingly, holders of the remaining 3% of the shares steadfastly refused to tender their stake to Chase. As the struggle continued, the Stock Market Crash of 1929 hit and things got complicated for Chase. Then in 1931, the Austrian and German economies collapsed, unleashing a wave of banking crises across Europe and the U.S. Losses soared at both Chase and its subsidiary American Express.

In 1932, the U.S. Senate launched an investigation into the roles the securities firms played during the stock market bubble just before its collapse. The Congress passed the Glass-Steagall Act in June 1933, prohibiting American banks from stock and real estate investment, and from investment banking and other non-bank activities. Chase was forced to spin off its Chase Securities division, which still held 97% of American Express. As Chase Securities Corp. had no use for American Express’ banking or travel businesses, it subsequently relinquished control of the firm back to public shareholders.

American Express' London Cornhill office became a legend in World War II when it resumed for business just one day after being destroyed by a German bomb. Throughout the war, the office made travel and freight forwarding arrangements for Allied military personnel and diplomats from the office.

The first modern-day credit card was invented by the Diners Club in 1950. Initially resisting the idea, American Express launched its signature travel-and-entertainment charge card (the green card) in 1958. It became an instant hit for wealthy globetrotting clients who already bought the travellers cheques and booked travel arrangements through American Express. Within five years, the card boasted over one million cardholders and 85,000 establishments where the card was accepted.

American Express diversified into other financial services during the 1960s, first with the purchase of securities brokerage firm W. H. Morton in 1966, then property & casualty insurer Fireman’s Fund Insurance Co. in 1968. Throughout the 1970s though, the firm faced increasing competition as both VISA and MasterCard entered the travellers cheque market. American Express suffered a major publicity disaster in 1979 when it launched a hostile offer for McGraw-Hill Publishing Co. The takeover attempt eventually failed.

In 1981, the company took over revered investment bank Shearson Loeb Rhoades for USD $915-million. However, American Express saw a reversal of fortune in the early 1980s. Its Fireman’s Fund Insurance used questionable accounting practices to hide falling revenues and rising losses. Though these troubles didn’t halt American Express’ ambitions to diversify: in 1984, it successively acquired Investors Diversified Services, Inc. (IDS, provider of financial planning, mutual fund and insurance products) and investment bank and broker Lehman Brothers Kuhn Loeb (for USD $360-million), which was merged into Shearson/ American Express to form the new Shearson Lehman Brother Holdings Inc.

The strategy to cross-sell expanded financial and travel products flopped, however, as existing clients were reluctant to switch to Shearson Lehman Brothers. American Express at the time also had a 50/50 cable-TV joint-venture called Warner-Amex. The concept to offer banking service via the TV screen was innovative but probably two decades too premature. In 1984 the firm sold its 50% stake in Warner-Amex to Warner Communications. Meanwhile, American Express in 1985 began to relinquish Fireman Fund Insurance’s P&C operations, while retaining its life insurance business.

In March 1987, American Express sold a 13% stake in Shearson Lehman Brothers to Nippon Life for USD $568-million, and distributed another 27% through an IPO. This turned out to be an opportune sale as investment banks suffered heavy losses during the Black Monday crash just months later. In 1988, the still 60%-owned Shearson Lehman bought broker E.F. Hutton & Co. for USD $1-billion, and adopted a new name Shearson Lehman Hutton Inc. American Express reduced its Shearson Lehman Hutton stake to below 50% in 1989, and finally sold its remaining stake to insurance giant Travelers Group in 1993. (Travelers spun off the investment banking business in 1994 as Lehman Brothers Holdings, which collapsed spectacularly in September 2008 during the global Subprime Mortgage Crisis.)

During the 1990s, however, smaller, independent merchants unhappy with ever rising commission fees led to a movement to leave the American Express system, or to openly discourage customers from paying with American Express cards. The movement appeared to have been futile in getting American Express to reduce the fees, as Visa and MasterCard both increased fees on their own premier credit cards.

Recent transaction(s):

• In 2003, American Express bought Great Britain's Threadneedle Asset Management Holdings from Zurich Financial for GBP 340-million (USD $570-million).
• In 2005, American Express spun off its asset management and advisory business into an independent NYSE-listed company called Ameriprise Financial.
• In 2007, American Express sold American Express Bank Ltd. to Great Britain's Standard Chartered plc for USD $1.1-billion (GBP 550-million). American Express Bank served 10,000 clients and provided services to financial institutions and affluent individuals. It had 75 offices across 47 countries.
• In 2008, American Express bought GE Money's Corporate Payment Services division from General Electric for USD $1.1-billion. GE's Corporate Payment Services provided credit card, purchasing and payment services for corporate clients as opposed to consumers. It had more than 300 large corporate clients. GE was exiting the private-label credit card business.
• Following the lead of Britain’s GBP 37-billion (USD $64-billion) partial nationalization of The Royal Bank of Scotland Group, HBOS and Lloyds TSB Group, the U.S. government unveiled a similar plan on 2008-10-14 under which the U.S. Treasury injected USD $250-billion in nine major U.S. banks: Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Merrill Lynch, Bank of New York Mellon, and State Street. The funds were disbursed under the name Troubled Asset Relief Program (TARP).
• As the credit crisis deepened, other financial firms faced mounting pressure to raise their capital reserves, and American Express joined almost 200 other financial companies to request an expanded TARP program that saw a total of USD $431-billion being distributed. In order to qualify, American Express converted itself to a bank holding company and obtained USD $3.39-billion in TARP funding, which it fully repaid the U.S. government in June 2009.

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United States Bank Mergers & Acquisitions (Wells Fargo & Co.)

Photo: An Overland Stage Coach offering tours to visitors is seen outside a former Wells Fargo & Co. and Overland Mail store in Virginia City, Montana.

With special thanks to Nancy Sharp for the use of this photo. You can view her photos on-line via this link: http://www.flickr.com/photos/8665131@N04/527965300/

Wells Fargo & Co.

Of all American banks, Wells Fargo & Company probably has the most storied past. Thanks to countless Western cowboy tales, the name Wells Fargo is immediately associated, not just in America but around the world, with images of gun-shooting bandits chasing down thundering horse-drawn coaches in the Wild Wild West, where whoever had the bigger gun was the law.


First Interstate Bancorp

First Interstate Bancorp, which in later years became part of Wells Fargo & Co., was initially related to both Transamerica Corp. and Bank of America. In 1904, Amadeo P. Giannini established the Bank of Italy in San Francisco, which eventually became the Bank of America. In 1930, Mr. Giannini acquired other banking and insurance interests in both the East and West Coasts and placed them under a holding company called Transamerica Corp.

In 1956, the passing of the Bank Holding Company Act prohibited a holding company from owning both bank and non-bank businesses. Transamerica decided to focus on the insurance business and spun off its banking operations consisting of 23 banks in 11 states as FirstAmerica Corp., as well as California’s Bank of America. In 1961, FirstAmerica changed its name to Western Bancorporation to reflect its strong West Coast focus.

In 1981, Western Bancorporation decided to de-emphasize its regional identity and once again changed its name to First Interstate Bancorp.


Norwest Corporation

Norwest Corp.'s history goes back to 1929, when the Northwestern National Bank of Minneapolis and several small Midwestern banks joined forces to form the Northwest Bancorporation. This was one of the two banking co-operatives established in Minneapolis in 1929, the other being the First Bank System Inc., which later became U.S. Bancorp. Northwest Bancorporation, commonly known as Banco, soon acquired more affiliates and by 1932, there were 132 member banks. Banco was one of the three banks exempted from the McFadden Act of 1927, the law that prohibited banks based in one state from opening branches out-of-state. The other two banks exempted from the McFadden Act were the First Bank System (present-day U.S. Bancorp) and Western Bancorporation (name subsequently changed to First Interstate Bancorp) which eventually also became part of Wells Fargo & Co. in 1996.

During the 1930s Depression, Banco was able to quickly redeploy capital from the healthier member-banks to those in financial distress and as a result, not a single Banco member-bank went under. During the 1970s, the largely autonomous members under the Banco umbrella began to unify and integrate their strategic planning, marketing, data processing, fund management and loan syndication efforts. By the late 1970's, Banco consisted of 85 member banks stretching across seven states: Minnesota, Wisconsin, Iowa, Nebraska, North and South Dakotas, and Montana.

In 1983, Northwest Bancorporation changed its name to Norwest Corporation, curiously dropping any reference to its core business of banking. In the same year, Norwest bought Iowa-based Dial Corp., a consumer loans company with operations in 38 states. Further expansion in the 1990s saw Norwest moving into the Indiana, Illinois, Colorado, New Mexico and Texas markets. Countering the 1990s trend towards ATM and telephone banking, Norwest stuck to branch-banking, emphasizing on building personal relationships with its clients, and on cross-selling financial products from basic banking accounts to mortgage and consumer loans.


Wells Fargo & Co.

Back in the 1830s, the Western frontier of the U.S. was wild, lawless, and undeveloped in many aspects. Everything from money and currency to foods, clothes, furniture, utensils and tools, and machineries and building materials were in short supply. Settlers often needed to import these “luxury” items from the East Coast, where the society was much more advanced and organized.

Unbeknownst to many, Wells Fargo & Co. was related to the American Express Co. In 1841 Vermont native Henry Wells established the Wells & Co. to provide express service between New York City and the upstate port of Buffalo. In 1850, Wells & Co. joined forces with rivals Livingston, Fargo & Co. and Wasson & Co. to form the American Express Co. At this point, American Express’ focus was sill in the U.S. Northeast, with limited service to the Midwestern states of Illinois, Ohio and Iowa. Foreseeing the great potential of the West Coast market, Henry Wells and William G. Fargo soon proposed expanding American Express’ service to California, but the company’s other directors balked at the risky move. Undaunted and determined, Mr. Wells and Mr. Fargo left American Express and New York for San Francisco to launch their own Wells, Fargo & Co. in 1852, offering gold trading (gold dust, bullion and coins), safekeeping as well as freight forwarding and delivery services.

Before long, Wells, Fargo appointed agents in other towns and gold mining camps in the West Coast. The company gained a reputation of trust by dealing rapidly and securely with clients’ money and goods. It also offered basic financial services like money orders, travellers’ cheques, and transfer of funds by telegraph.

Wells, Fargo was also known to deploy the fastest mode of transport whenever possible, whether it was stagecoach, steamship, railroad, pony rider or telegraph. In the 1850s and 1860s, the firm was involved with the Overland Mail Company (the famous Butterfield Line) as well as the Pony Express. Rolling across 2,700 miles of open land, deserts, mountainous passes, and crossing rivers, Wells Fargo delivered goods and gold from St. Louis to Los Angeles and San Francisco twice a week on a 25-day journey.

Following the completion of the transcontinental railway in 1869, Wells, Fargo’s overland trans-continental network was dismantled as the railway offered a much faster alternative. However, localized stagecoach services continued where the railroad did not reach. Wells, Fargo established itself as the first nationwide express company connecting 2,500 communities in 25 states. From the urban and industrial Northeast to the transportation hubs of Chicago and St. Louis, the agricultural Midwest, the ranches in Texas, the mining communities in Arizona and lumber mills in the Pacific Northwest, Wells, Fargo picked up and delivered goods of all sorts, and issued and cashed bank drafts, travellers cheques, conducted fund transfers by telegraph, and safe-guarded gold and other valuables.

In 1905, “Wells Fargo & Co.’s Bank, San Francisco” was formally separated from Wells Fargo & Co. Express. Wells Fargo & Co’s Bank then merged with Nevada National Bank to form the Wells Fargo Nevada National Bank. The bank’s building, however, was destroyed in the 1906 San Francisco Earthquake, but the bank’s vault and precious metals reserves were left intact, and the bank survived the disaster.

Wells Fargo Nevada National Bank acquired the Union Trust Co. in 1923 and in 1960 acquired the American Trust Company, a northern Californian bank with an extensive branch network. Following a few name changes, the name Wells Fargo Bank was adopted in 1962. In 1968, the bank switched from a state charter to a national one.

Federal legislation changes in the 1980s allowed the bank to provide state-wide banking by expanding into southern California. In 1986, Wells Fargo acquired Crocker National Bank for USD $1.1-billion from Britain’s Midland Bank. Just two years later, it acquired Barclays Bank of California.

Further banking reforms in the 1990s finally permitted Wells Fargo to return to other Western, Midwestern and Eastern states, some 80 years after its express business was nationalized in 1918.

Recent transaction(s):

• In 1996, Wells Fargo & Co. bought First Interstate Bancorp for USD $12.31-billion. However, the integration of Wells Fargo and First Interstate proved challenging: Wells Fargo had been at the forefront of high-tech banking and indeed was the first major bank to offer Internet banking back in 1995; meanwhile, First Interstate had always prided its personal, relationship banking offered at the branch level. Computer glitches during the integration soon led to "lost" customer deposits, bounced cheques, and long line-ups. Customers in droves left Wells Fargo for other banks.
• In 1998, as Wells Fargo was weakened due to its much-criticized integration issues, Norwest Corp. acquired Wells Fargo & Co. for USD $34.61-billion but decided to keep the Wells Fargo name as well as its San Francisco headquarters. Learning from the Wells Fargo-First Interstate lesson, the Norwest-Wells Fargo integration proceeded much more smoothly.
• In 2000, the new Wells Fargo acquired small banks in Michigan, Texas, Alaska and Nebraska.
• In 2000, Wells Fargo acquired Utah's largest bank First Security Corp. for USD $2.9-billion.
• In 2007, the bank bought Sacramento-based Placer Sierra Bancshares, a California bank with 50 branches, for USD $645-million.
• Also in 2007, the bank bought Greater Bay Bancorp for USD $1.5-billion. Greater Bay was a holding company and operated 41 branches in the San Francisco Bay area through subsidiaries Santa Clara Valley National Bank, Mid-Peninsula Bank, Peninsula Bank of Commerce and Mount Diablo National Bank.
• During the summer of 2008, the global credit bubble burst and banks around the world suffered billions of losses from bad mortgage and consumer loans. As institutional investors withdrew from the short-term money market, banks found themselves short of the capital needed to finance their lending activities. Wachovia Corp. was believed to be on the brink of collapse when the Federal Deposit Insurance Corp. (FDIC) brokered a deal on 2008-09-29 under which Citigroup would buy Wachovia's banking operations and branches for USD $2.16-billion in stock. Citigroup would take over a USD $312-billion loan pool from Wachovia, and be responsible for the first USD $42-billion of potential losses from the pool; the FDIC would absorb any potential losses beyond the first USD $42-billion. Citigroup would also take over Wachovia's customer deposits. Not included in the sale were Wachovia's AG Edwards and Evergreen divisions.
• Merely fours days later, in a bizarre twist of events, Wachovia rescinded the sale to Citigroup and agreed to a USD $15.1-billion buyout from Wells Fargo & Co. Under the new agreement, for each Wachovia share, shareholders would receive 0.1991 share of Wells Fargo, valuing each Wachovia share at about USD $7. Wells Fargo’s offer did not require any financial guarantee from the FDIC, and would also assume all of Wachovia’s preferred stock and debt. Wells Fargo said it expected to incur USD $10-billion in integration charges, and would raise USD $20-billion from issuing new securities to maintain its capital position.
• In the days following the new sale agreement, Citigroup and Wells Fargo engaged in a brief legal battle for the right to acquire Wachovia, but Citigroup on 2008-10-08 accepted the fait accompli, essentially ending its challenge to Wells Fargo. When the deal closed in December 2008, Wells Fargo’s offer for Wachovia was valued at USD $12.68-billion.
• Following the lead of Britain’s GBP 37-billion (USD $64-billion) partial nationalization of The Royal Bank of Scotland Group, HBOS and Lloyds TSB Group, the U.S. government unveiled a similar plan on 2008-10-14 under which the U.S. Treasury invested USD $250-billion in nine major U.S. banks. The nine banks that issued new preferred stock in exchange for USD $250-billion in funds were: Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Merrill Lynch, Bank of New York Mellon, and State Street. All nine banks’ preferred stock would pay 5% dividends annually in the first five years, and 9% thereafter. The funds were disbursed under the name Troubled Asset Relief Program (TARP). Wells Fargo received USD $25-billion from TARP.
• In December 2009, Wells Fargo raised USD $12.25-billion from a stock issue to help repay the USD $25-billion state aid it received from the U.S. government under TARP in October 2008.
• In November 2010, Well Fargo and Citigroup settled out of court over the acquisition of beleaguered bank Wachovia Corp. (see entry in 2008). Under the terms of the settlement, Wells Fargo paid Citi USD $100-million and both banks terminated their legal challenges against each other
• In October 2015, Wells Fargo acquired USD $32.0-billion of loans and leases from GE Capital. The businesses acquired included all of GE Capital's commercial distribution finance and vendor finance operations, as well as a portion of the corporate finance unit.  The operations offered financing for manufacturers as well as dealers across many sectors, including automotive, aerospace, motorsport, marine, recreational vehicle, electronics & appliances, office imaging, food & beverage, retail, technology and construction, amongst others. Ninety percent of the loans and leases are based in the U.S. and Canada. 

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United States Bank Mergers & Acquisitions (Wachovia)

Photo: A Wachovia bank machine at the corner of an intersection. The automobiles and bank machines are powerful symbols of America's consumerism and auto culture.

With special thanks to Jon of North Carolina for allowing me to use his photo. You can see more of his photos on flickr.com via this link: http://www.flickr.com/photos/cherawsc/


[Limited-coverage page]
Wachovia Corp. was acquired by Wells Fargo & Co. in late 2008. At the time, Wachovia was the No. 4 bank in the U.S.

Wachovia Corp.
First Union Corp.

First Union Bank traces its beginnings to 1908 when the Union National Bank was founded in Charlotte, North Carolina. For the first half-century, Union National remained a Charlotte bank. In 1958, it merged with First National Bank and Trust of Ashville, creating the First Union National Bank of North Carolina. In 1964, First Union acquired the Cameron-Brown Company, one of the largest mortgage loan companies in the Southeast.

In June 1985, the U.S. Supreme Court upheld state laws that permitted reciprocal regional interstate banking, meaning that banks from neighbouring states could merge with each other so long as they only operated within the same region. Prior to these state law changes, U.S. banks had been forbidden to operate out-of-state. North Carolina-based First Union promptly expanded out of state to South Carolina, Georgia, Tennessee and Florida. In the same year, it acquired the Northwestern Financial Corp. of Greensboro, North Carolina. Then in 1986, First Union bought Georgia's First Railroad and Banking Co. for USD $779-million.

Wachovia Corp.

The name Wachovia is the Latinized name of the German region of Wachau. In 1753, Moravian immigrants from present-day Germany settled on a tract of land in North Carolina that resembled the Danube River valley region of Der Wachau. The Moravian settlers named their settlement Wachovia to commemorate their home land.

Wachovia National Bank was founded in 1879 in the North Carolinian town of Winston. In 1893, another financial institution with a similar name, Wachovia Loan and Trust Co., was founded. The two Wachovias merged in 1911 to form Wachovia Bank and Trust Co. In the 1980s, restrictions on U.S. interstate banking were relaxed, allowing banks based in one state to acquire out-of-state banks. Wachovia Corp. promptly merged with Georgia's First Atlanta Corp. in 1985 to form the First Wachovia Corp.

Recent transaction(s):

• In 1991, First Wachovia Corp. dropped the "First" from its name and acquired the South Carolina National Corp. for USD $835-million.
• In 1996, First Union Corp. acquired Newark, N.J.-based First Fidelity Bancorp for USD $5.4-billion, expanding into New Jersey for the first time.
• In 1997, Wachovia purchased Charlotteville, Virgina-based Jefferson Bankshares Inc. (Jefferson National Bank) for USD $542-million.
• Late in 1997, Wachovia acquired Richmond, Virgina's Central Fidelity Banks Inc. for USD $2.3-billion.
• In 1997, First Union bought Virginia's Signet Bank for USD $3.25-billion. Signet operated 230 branches and 248 ATMs in the state.
• Also in 1997, First Union bought Philadelphia's CoreStates Financial Corp. for USD $17.1-billion.
• In 2001, First Union Corp. and rival Wachovia Corp. agreed to merge in a deal worth USD $14.6-billion. Soon after that announcement, Atlanta-based SunTrust Banks made a hostile USD $14.7-billion offer for Wachovia, but eventually Wachovia's shareholders accepted the offer from First Union. However, the new entity took Wachovia's name.
• In 2004, the new Wachovia acquired Alabama's SouthTrust Corp. for USD $14.36-billion. SouthTrust had more than 700 branches in Alabama, Florida, Georgia, Mississippi, the Carolinas, Tennessee, Texas and Virginia.
• In 2005, Wachovia bought auto finance company Westcorp and its 84%-owned WFS Financial for USD $3.42-billion. Wachovia also offered USD $490-million to acquire the remaining 16% of WFS Financial from the open market.
• In 2006, Wachovia bought California's Golden West Financial Corp. for USD $25.5-billion at the very height of the real estate bubble.
• In 2007, Wachovia agreed to buy St. Louis-based investment broker A.G. Edwards Inc. for USD $6.8-billion in cash and stock. A.G. Edwards was founded in 1887 and held USD $773-billion of client assets. The purchase made Wachovia the No. 3 broker in the U.S. with USD $1.1-trillion in client assets. Merrill Lynch & Co. ranked No. 1 at the time, followed by Citigroup's Smith Barney division.
• Following the burst of the U.S. housing bubble in 2007, losses from the collateralized debt obligations (CDOs) soared to billions of dollars around the world and the inter-bank credit market froze during the summer of 2008. As analysts consistently questioned the viability of Wachovia, depositors transferred funds electronically to other banks despite that most deposits were insured by the Federal Deposit Insurance Corp. (FDIC).
• Globally, banks that relied on the credit market to finance their mortgage lending began to fail as their funding sources dried up. HBOS (Halifax Bank of Scotland), Fortis (Belgium and Netherlands) and Lehman Brothers all collapsed in September 2008. The former two were rescued by their respective national governments, while the U.S. government opted to let Lehman Brothers go bankrupt.
• On 2008-09-29, the FDIC took action and brokered a deal under which Citigroup would buy Wachovia's banking operations and 3,300 branches for USD $2.16-billion in stock. Citigroup would take over Wachovia’s USD $339-billion in deposits, a USD $312-billion loan pool, and be responsible for the first USD $42-billion in loan losses from the pool. The FDIC would absorb all losses beyond the first USD $42-billion. As part of deal, Citigroup would issue USD $12-billion of preferred securities and warrants to the FDIC for assuming the risk of Wachovia’s loans. Not included in the sale were Wachovia's A.G. Edwards and Evergreen divisions. Citigroup’s acquisition of Wachovia would strengthen Citigroup’s own capital base and lower its cost of capital as Wachovia’s huge client deposits would serve as a stable and inexpensive source of capital.
• Merely fours days later, in a bizarre twist of events, Wachovia rescinded its sale to Citigroup and agreed to a USD $15.1-billion buyout from Wells Fargo & Co. Under the new agreement, shareholders would receive 0.1991 share of Wells Fargo for each Wachovia share, valuing the offer at seven times that of Citigroup. In addition, Wells Fargo’s offer did not require any financial guarantee from the FDIC, and would also assume all of Wachovia’s preferred stock and debt. Wells Fargo said it expected to incur USD $10-billion in integration charges, and would raise USD $20-billion from issuing new securities to maintain its capital position. Citigroup immediately denounced the Wells Fargo-Wachovia merger proposal. Meanwhile, the FDIC said it continued to stand behind the original Citigroup-Wachovia merger over the Wells Fargo-Wachovia scenario.
• In the days following the new sale agreement, Citigroup and Wells Fargo engaged in a brief legal battle over who had the right to acquire Wachovia. At one point, Citigroup said it would sue Wells Fargo and Wachovia for USD $60-billion in damages for breaking off the original arrangement. However, on 2008-10-06, all three banks agreed to a temporary suspension of all lawsuits until the end of 2008-10-08 while they attempted to settle on the dispute, or whether they could carve up Wachovia amongst themselves.
• On 2008-10-07, however, Citigroup terminated talks with Wells Fargo and Wachovia, essentially ending its challenge to Wells Fargo’s acquisition of Wachovia. Subsequently, Wells Fargo & Co. closed its acquisition of Wachovia Corp. on 2008-12-31.
• In November 2010, Wells Fargo and Citigroup settled out of court over the fight for the beleaguered Wachovia. Under the terms of the settlement, Wells Fargo paid USD $100-million to Citi, and both banks terminated their lawsuits against each other.

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