Bidding war for Wachovia erupts - report
Citigroup and Wells Fargo are reportedly in a bidding war for troubled bank Wachovia, according to a New York Times report.
NEW YORK (CNNMoney.com) -- A bidding war for Wachovia has erupted between banking giants Citigroup and Wells Fargo, according to a published report Sunday night.
Citing people involved in the talks, The New York Times reported that the discussions come as concerns have grown about Wachovia's viability, despite a breakthrough reached Sunday by Congressional negotiators on a $700 billion bailout for the financial system.
Rumors of deal talks arose on Friday as published reports said that Wachovia was considering a deal with Citigroup (C, Fortune 500), Spain's Banco Santander (STD) or Wells Fargo (WFC, Fortune 500).
Sunday's report in The Times added that the Federal Reserve and Treasury Department were also participating in the discussions, but that the government is refusing to help bidders by guaranteeing a part of Wachovia's assets the way it did for Bear Stearns in March when it was sold to JPMorgan Chase (JPM, Fortune 500).
The government was also not ready to take over Wachovia the way it did Washington Mutual last week, The Times reported, unless its financial position deteriorates more rapidly.
Timing for a deal was not clear, and the talks could extend beyond Sunday night, The Times said.
Wachovia (WB, Fortune 500) shares were hit particularly hard on Friday - the stock lost nearly a third of its value.
Though the stock closed at $10 on Friday, Citigroup and Wells Fargo are unlikely to bid more than a few dollars a share for Wachovia, according to The Times.
Also unclear, The Times said, was whether the banks would bid for all of Wachovia or pieces. Wachovia's retail banking operations would help Citigroup and Wells Fargo expand their branch networks, The Times said.
Spokespeople for Citigroup, Wachovia and Wells Fargo declined to comment on Friday. A representative for Santander was not immediately available to comment.
This isn't the first time that Wachovia has been mentioned entering tie-up talks. A little over a week ago, there was rampant speculation that Morgan Stanley and Wachovia were reportedly discussing a merger. A deal between the two firms looks increasingly unlikely though after Morgan Stanley (MS, Fortune 500) agreed to sell up to a fifth of itself to Mitsubishi UFJ Financial Group (MUFG), one of Japan's largest banks, earlier this week.
Following a string of high-profile collapses of banks in recent weeks, there has been increasing speculation that Wachovia could be the next one to go.
Wachovia reported losses during the past two quarters due in large part to its exposure to U.S. mortgage market. Some analysts have cited the company's ill-timed 2006 acquisition of the California mortgage lender Golden West Financial Corp. for its current woes.
A Wachovia representative stressed in a statement on Friday that it has a "strong retail franchise and large and stable deposit base," adding that it was working to strengthen both its capital and liquidity.
Were Wachovia to enter a deal, it would mark yet another big shake up of the nation's banking industry, which has undergone a dramatic transformation in the past two weeks including the demise of Lehman Brothers, the acquisition of Merrill Lynch by Bank of America (BAC, Fortune 500) and the failure of Washington Mutual and subsequent purchase by JPMorgan Chase. 
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