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Judge blocks Wells Fargo-Wachovia deal

  • Story Highlights
  • Judge temporarily blocks Wells Fargo from acquiring Wachovia
  • Wells Fargo agreed to pay $15.1 billion for Wachovia
  • Citigroup, with help from FDIC, had deal to purchase Wachovia for $2.1 billion
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(CNN) -- A judge has temporarily blocked Wells Fargo's acquisition of Wachovia, according to a news release by Citigroup, which previously had a deal with Wachovia.

New York State Supreme Court Justice Charles Ramos issued the order, saying that Citigroup and Wachovia must appear before him on Friday, the news release said.

Citigroup has been pressing Wachovia and Wells Fargo to abandon their merger plans, arguing that it had entered into an exclusivity agreement with Wachovia.

In a deal struck with the assistance of the Federal Deposit Insurance Corporation (FDIC) on Monday, Citigroup had offered to take over the Charlotte, North Carolina-based bank for $2.2 billion. However, four days later, Wells Fargo said it was buying Wachovia for $15.1 billion.

Citigroup may have a legitimate claim to challenge the Wells Fargo deal.

A copy of the exclusivity agreement between Citigroup and Wachovia obtained by reveals that Wachovia had agreed not to seek out another bidder, nor to provide information or enter talks that might facilitate a rival bid.

A Wells Fargo victory would transform the company, whose operations and bank branches are largely located in the Midwest and on the West Coast, into a dominant presence along the East Coast and in the Southeast.

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It would also put the San Francisco, California-based bank squarely in competition with the likes of JPMorgan Chase and Bank of America.

If Citigroup prevails, it would represent a huge step forward for the company's retail banking aspirations, whose footprint has lagged many of its biggest rivals.

Investors cheered Citigroup's decision last week to buy Wachovia's banking assets. However, some observers had wondered whether Citigroup could pull off the deal since it is in the process of a major restructuring after posting close to $18 billion in losses over the past three quarters.

In the past month, the nation's banking industry has undergone a dramatic facelift, including the failure of Washington Mutual and its subsequent purchase by JPMorgan Chase, as well as Bank of America's acquisition of Merrill Lynch.

All About Wells Fargo & CompanyWachovia CorporationCitigroup Inc.

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