Wells Fargo - Research Paper Example

Instution Conclusion October, 2008 marked a dramatic turn of dealings at the summit of the Wall Street crisis, with Wachovia backing out of a deal with Citigroup and entering into a major merger with Wells Fargo, the largest stock merger ever. The merger was a result of prior collapse within Wachovia’s mortgage portfolio and Citigroup had stepped up to their rescue, offering a $1 share price and which Wachovia readily accepted consecutively to avoid bankruptcy. Some days later, Wells Fargo pounced down with a bid value seven times as much, and Wachovia willingly accepted.

The Wells Fargo arrangement baffled most observers, enraged Citigroup, resulted in weeks of extreme legal squabbling, and eventually went through. It was an unusual marriage, coupling a Charlotte-based stock that had funded the Sun Belt’s housing gurgle with a San Francisco-based stock that had mostly evaded it. What was the real story behind the two banks merger? As it is evident, a Birmingham, based construction comprehensive supply corporation seems to have played a major part in this merger.

Wells Fargo and Wachovia didn’t have any clear leadership links at the time of their merger. Network diagrams of their boards and top executives show no knits. There are no personalitys with links in both companies. (Boards of directors of Wells Fargo & Wachovia, pre-merger) But that alters when you spread out the graph to include Vulcan Materials, a Birmingham founded concrete broker. On the Wells Fargo side, Donald B Rice, the chairman of Wells Fargo until 2007, sits on the Vulcan board, while Wachovia’s board comprised not one but two Vulcan Materials board members: Donald M James and John D Baker II.

Linking boards of Wells Fargo, Wachovia, and Vulcan MaterialsThese three characters have extremely strong links to Vulcan Materials. Donald B Rice, the Wells Fargo director, has been a board member for almost twenty years, the second greatest spell of any board member. Donald M James is Vulcan’s Chairman and Chief Executive Officer, since 1996. John D Baker II is a comparative newcomer to the business, as the former CEO of Florida Rock Industries, which was acquired by Vulcan in 2007. The Vulcan-Florida Rock deal was huge enough to draw the interest of the Justice Department’s anti-trust division.

Physically powerful links to Vulcan without a doubt connected the gap linking Wachovia and Wells Fargo, but is this enough to wind up that the corporation played a major part in the merger? Perhaps not. These board members recognized each other, so what? Commercial America’s societal networks are intense. But what ensued following the Wells Fargo-Wachovia merger puts forward that the Vulcan three were major players: two of the four new seats on Wells Fargo’s board were offered to the Vulcan directors (Adubato, 2011).

Consequently, Wells Fargo turned out to be the states biggest mortgage lender and the second leading diversified monetary services firm in the U.S with regards to deposits Stock after acquiring Wachovia (WB). There was a legal row with the transaction however, since Citigroup had sought to purchase Wachovia too. Wells Fargo and Citigroup arrived at a resolution, with Wells Fargo reimbursing Citigroup $100 million to clear up the court cases. Wells Fargos sold $12.6 billion in common stock and $25 billion in number one stock to the United States Government through ex-U.S. Treasury Secretary Paulsons $700B Troubled Assets Relief Program (TARP) as component of the agreement to get enough money for the acquisition.

Work citedAdubato, Steve. You Are the Brand. New Brunswick, N.J: Rutgers University Press, 2011. Print.