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.