Chapter 9 Assignment: News Story

Intended Audience:  Moore County residents

 

 Wachovia Merger with Wells Fargo Expected by Year’s End

October 30, 2008

By Lisa Youngclaus, FINANCIAL NEWS CONTRIBUTOR

 

SOUTHERN PINES—Wachovia announced today that shareholders will vote on the Wachovia-Wells Fargo merger agreement on December 10, 2008.  The merger, which represents a $15.1 billion stock deal for Wachovia shareholders, was approved by federal regulators in mid-October, creating the largest banking network in the United States with 6,675 branches.

Wachovia operates two branches in Southern Pines. A third branch is currently under construction at Olmsted Village, in Pinehurst. The local Wachovia branches represent $130 million in deposits giving Wachovia the third largest market share, following BB&T and First Bank.  There are eleven banks operating 40 branches in Moore County, according to the Moore County Chamber of Commerce. 

 Both Wachovia and Wells-Fargo stockholders must approve the merger on December 10 which will combine Charlotte-based Wachovia banking, Wealth Management and Securities operations with San Francisco-based, Wells Fargo, by year’s end.

In response to recent reports that some Wachovia shareholders might not favor the merger, Stuart Strickland, senior vice president and partner, Wachovia Wealth Management, the personal investment and money management division of Wachovia, says that while there are some “disgruntled” shareholders, he predicts the deal will go through. 

 “There, of course, have been concerns among a very few shareholders that the Wachovia price may not represent fair market value, but in these economic times, this is the fair market value,“ says Strickland.

 Strtickland believes the merger is a good deal for stockholders and a good marriage for the two banking giants.  “The more I learn about Wells Fargo, the better fit I see,” said Strickland.  “There is a good blend of styles and a shared focus on small business lending and local customers.”  

Wells Fargo Chairman Dick Kovacevich has been quoted in the press as stating that  the merger combines Wachovia’s customer service culture with Wells Fargo’s sales and cross-selling culture.  

The Wells Fargo offer supplants a prior agreement Wachovia had reached in September with New York-based Citigroup to sell Wachovia banking assets for $2.1 billion. Following a week of negotiations, Citigroup bowed out of contention and has yet to drop a $60 million lawsuit claiming damages against Wachovia and Wells Fargo for “spoiling” the deal. 

Wachovia customer, Mike Dyer, expressed relief that there is a merger underway instead of a bank closure. “I have my IRA account with Wachovia Securities and they assured us that our assets were safe.  Now, with the merger and all the government protection the banks are getting, we are just taking the long view and waiting for the market to turn around.”

As for a market “turnaround”, Strickland believes that improvements in the overall economy are unlikely to occur until the second half of 2009.  “There are some tough times ahead.  Jobs and homes will be lost through the first half of 2009.  But by the second half of next year we should see the signs of an economic turnaround.”

“American banks—and the American consumer—leveraged themselves to a point where it became necessary to go through the painful process of de-leveraging.  In this case, the Government has stepped in, which is unlike what they did in the 30’s.  That’s why we won’t get into a situation like The Great Depression again, “  Strickland said.  “Unfortunately, the government is going to be very involved in business now.  There will be lots of new regulations, which will make it harder to do business, but it will bring stability.”

Stability is a benefit local Wachovia customers and employees are anxiously awaiting both with new partner, Wells Fargo and in the broader U.S. economy.

“I just want a good night’s sleep,” says Dyer. Many folks in Southern Pines are likely to agree.

Sources: 

Calvey, Mark.  “Wells chairman expects faster recovery.” Philadelphia Business Journal.com 22 Oct.  2008. http://www.bizjournals.com/jacksonville/stories/2008/10/20/daily23.html.

Ellis, David.  “Wells, Citi square off in Wachovia bid.” CNN Money.com   3 Oct.  2008. <http://money.cnn.com/2008/10/03/news/companies/wells_fargowachovia/index.htm/>.

Levy,  Ari.  “Wells Fargo Chairman Says Crisis Not Worst He’s Seen (Update1)” Bloomberg.com 21 Oct. 2008.  http://www.bloomberg.com/apps/news?pid=email  en&refer=us&sid=a8btDJXhCne/>.

Steel, Robert.  “CEO Message” 22 Oct.  2008.  <http://www.Wachovia.com/>.

 

Questions for Wachovia executives:

·      Number of Wachovia branches in Moore County?

·      Number of bank customers or deposits represented?

·      Expected Stockholder vote timing?

·      Personal view of merger?

·      Clients concerns over past few weeks?

·      What can customers expect in terms of service, changes?

·      Outlook for 2009?

·      Banking stability?

·      Understanding and implications of the Financial “crisis”?

(In addition to Stuart Strickland, I attempted to contact Richard Guy, local branch executive in the Trust department, who was out of the office.)

Questions for Wachovia customers:

·      How do you feel about the proposed merger with Wells Fargo?

·      Any concerns?

·      How do you feel about remaining with the bank versus moving your accounts?

·      Does it mean anything to you when you hear that your local bank will soon be part of the largest banking group in the U.S.?

For Internet publication, I recommend:

·      Link to the stories/sources cited above.

·      A photo of Stuart Strickland in his Moore County office.

·      Photos of customers.

·      Link to Wachovia and Wells Fargo websites.

·      Photo of new branch office under construction.

·      A posting place for other local Wachovia customers and shareholders to express their views.  “What do you think?”

·      A link to the video of Wells Fargo Chairman’s speech to Charlotte Wachovia employees.

·      Possibly, a checklist or question/answer list for bank customers about what new measures now exist to insure protection of bank assets.

Facts I checked were:

·      Stuart Strickland’s title

·      Wachovia buyout price

·      Status of legal action

·      Anticipated shareholder voting date and deal closing date

·      Whether Wells Fargo was hyphenated

 

Revision Note:  incorporated all your corrections, suggestions including adding two sources, hyperlinking, revised headline and lead.