Citigroup, Wachovia, Wells Fargo, the Exclusivity Agreement, and Specific Performance… and the Huntsman Opinion

Elizabeth Nowicki —  3 October 2008

On Monday, Citigroup announced that it had reached an agreement in principle to acquire some of Wachovia’s assets.  Today, Wachovia announced it was being wholly acquired by Wells Fargo in a stock deal.

Citigroup responded with outrage, announcing that Wachovia was in breach of its Exclusivity Agreement with Citigroup.  If you read the Exclusivity Agreement, you see that Citigroup is right – Wachovia had the obligation to exclusively negotiate with only Citigroup until October 6, 2008.  Moreover, the Exclusivity Agreement gives Citigroup the right to “Specific Performance” if Wachovia breaches this agreement.  But *what* is required by that Specific Performance seems unclear.

I read the Specific Performance requirement in the Exclusivity Agreement to mean that Citigroup can force Wachovia to specifically perform the terms of the Exclusivity Agreement, which requires that Wachovia “continue to proceed to negotiate definitive agreements… relating to the Transaction in form and substance satisfactory” to Wachovia and Citigroup.  Steven Davidoff reads the specific performance requirement to allow Citigroup to try to force performance of the actual deal itself.

If I am correct in my reading, an outcome for this matter is unclear.  While Citigroup can force Wachovia to sit down and negotiate (specific performance of the Exclusivity Agreement), can Wachovia just say “no” to everything Citigroup offers now that a much better Wells Fargo deal is on the table?  Normally, I might imagine so.  Given the Huntsman v. Hexion opinion from Vice Chancellor Lamb, issued late Monday night (Septemeber 29th), however, I am not so clear that Wachovia can.

Where does this leave things, then, in the Citigroup, Wachovia, Wells Fargo dance?  Look for a second post on this topic later today.

4 responses to Citigroup, Wachovia, Wells Fargo, the Exclusivity Agreement, and Specific Performance… and the Huntsman Opinion


    Specific performance only means that Wachovia must submit the offer to its shareholders. They can not be required to do more than their articles of incorporation require. Without the permission of the Wachovia shareholders there can be no deal. The only way Citi will get their approval is to make a better offer than Wells.

    north fork investor 5 October 2008 at 8:34 am

    I fail to see the relevancy of Lamb’s decision in the Huntsman case to the situation at hand. But I did agree with your interpretation of the letter contract’s specific performance language versus Davidoff’s. Ramsey’s TRO (haven’t seen the language yet) appears to support your viewpoint. The parties have a week to talk without interference from WFC.


    Of course, whether or not the remedy of specific performance is available is within the discretion of the court. The contract provision does not guarantee that there will be specific performance imposed on Wachovia.


    Ms. Nowicki:

    How many $1.2 Billion tort claim cases have you tried to jury verdict?

    How many $1.2 Billion breach of contract cases have you tried to jury verdict?

    Isn’t it true that you are an alumni of the law firm that negotiated the exclusivity agreement for one of the parties? Care to tell us which firm and who they represent in this deal?