Merger and Acquisition Between Wells Fargo and Wachovia - Term Paper Example

Merger/Acquisition Wells Fargo & Wachovia Merger and acquisition between Wells Fargo and Wachovia. Introduction In 150 years back, the foundation of the company Wells Fargo become legendary form the founders Henry Wells and his counter part William Fargo from its heritage which stills holds a great identity of image, its people and values. The company offered banking through buying of gold, and selling of paper bank drafts which was good as gold, more also it expresses rapid delivery of the gold and anything else valuable. Wachovia become the first in the year 1958 of North Carolina, Union National Bank and therefore as the Wachovia Corporation in the year 1968. It has total assets of $330 billion in the 2001 and employees of about a total of 84,000. It provides a broad range of services search as asset management, management of wealth, banking products for investments and corporate. It has operations in 21 sates and retail banking offices of a total 3,300 from Florida to the Connecticut and from the west to California and Texas. Wachovia manages over $1.2 trillion assets for clients through a registered representative of about 18,600 and offices nation wide of about 1,500. In July Wachovia named CEO was Robert Steel who was known to be at the department of Treasury under the title secretary. The merger. The growth of firms is by purchasing other companies, thus merger could be the buying of one firm by another. Acquisition is uniquely in same principal as merger but is usually described to reference a huge firm purchases. In other words mergers and acquisitions are basically friendly hostility also occurs. Managers and directors of the board in a firm for a acquisition disapprove of the merger in the situation a of a hostile takeover. Hostile takes place in merger or acquisition, a rich yet wealthy investor or another firm may take or make a tender offer to gain control of the target company. To buy the stock of a company aimed for acquisition at a cost slightly higher enough to entice stockholders to sell their shares is what we call a tender offer. The strategy to use to gather stockholders control of votes a aimed firm is called a proxy fight. When a firm rider is successful and therefore takes over the aimed firm the replacement of the existing management is usually done. In the case where mergers are hostile or either friendly they are usually categorised as horizontal, conglomerate or vertical. Horizontal merger could be the merger between companies that make and service in similar market or sell similar products for example the merger between Wells Fargo and Wachovia which it leads to the reduce of companies in the industry thus make completion reduced also. The horizontal mergers are however reviewed closely by the federal agencies before approval for protection in the market in competition. Vertical mergers are between companies that operate in perspective different in related levels in production. Conglomerate mergers is between companies and however different industries. In December 31, 2008 effectively completed the merger between Wells Fargo and Wachovia involving the Americans in the northern part the extensive system of distribution for services search as financial with stores over 11,000, using technology like ATMs of about 12,260 and wellsfargo.com plus PhoneBankSM. Customers can enjoy the free usage of combined ATMs of Wells Fargo and Wachovia. The merger involves in belief that every compelling value proposition of our tem members, customers shareholder and communities with a significant role for growth in the market. The team can benefit from even from development of professionalism opportunities in broad geography to the customers they can benefit from much from values that are much better for entrusting us with their businesses, for communities can also benefit in areas that we can leading contributor for basically financial, human and also social capital. The shareholders can also benefit form the growth that exists in the opportunities managed and created by this merger. The thoughtfulness and also the deliberate in our merger integration for three years. Just as we however do with the merger integration of the North Wells Fargo that is successful. We shall take time to do the right thing for our customers as always putting their interests first through seeking to satisfy their needs financially and therefore succeed financially. The head of the Companies merger transition the executive vice president Pat Callaham initiated that Wachovia customers will continue to see the Wachovia as brand for the near future in their banking stores. For the key of success integration will be form our effort to provide customer from Wachovia to continue banking as they do today. Wells Fargo acquired most of all shares outstandingly of the common stocks of Wachovia in a stock to stock through transaction at the closing. The Wachovia shareholders received 0.1991 in shares of Wells Fargo in exchange of each share in Wachovia common stock they owned. The series of each shares converted in to shares that Wachovia preferred that however means of the Wells Fargo corresponding preferring that the stocks having the same rights and preferences. As the result from the transaction the acquiring of all of Wachovia assets and its obligations by Wells Fargo. With Wachovia for the first time with Wells Fargo have the presence in Alabama in community banking and many other parts in the United States. The Wachovia symbol of stock “WB” in December 31, 2008 was retired effectively Fargo, Wells, (2008) Its principals were clarified through the year’s program for they are: To be a good firm in the community in which it does businesses and to outstandingly demonstrate its support in education, where else it valued education and that communities are enriched. To recognise leadership that was outstanding in North Carolina and the principals of rolls in establishment of enviromative conducive. Many criteria to be judged of which that each are how ever expected to respect and admiration advantageously for the students, parents and students. The committees of the regional selection must read and evaluate each candidate portfolio, and should personally interview. Through the culmination of Wells Fargo is ceremoniously in Raleigh. From across the state it has been added to a roll auspicious for Wells Fargo provided $1 million to individuals. From the calculated risk front Well Fargo. Wachovia’s strategy has concretively to diversify and providing financial services to expanded customer base in order to accomplish the objective Fargo, Wells, (2008). Wachovia acquired over 100 banks in the last two decades. The becoming of a leading banking in the east, the south and west of United States by the thrifts and brokers as well at the retail securities nation wide brokerage businesses. In the year 2006 when the market cap was $86 billion, Wachovia’s Objective of expansion to California thus to gain market share in the U.S. Wachovia acquired the financial corporation of the Gold West in Oakland for $25.5 billion. The Gold West however increased Wachovia where then the California retail presence. Housing market in the United States experienced and increase in sub-prime in the spring year of 2007 of home loans delinquencies and decline in housing values. That was in the remainder of 2007 with the accordance in remark and valuation required by the United sates of which they accepted principals of accounting. In the fourth quarter of the year 2007 Wachovia reports a net income of $51 million compared to the previous fourth quarter of the year 2006 which it heard $2.3 billion. In regard in the light worsening outlook form the housing prices the changing borrower behaviour plus the valuation losses of the mark to mark of Wachovias leveraged lending, RMBS, CDO’s Wachovia’s portfolio Fargo, Wells, (2010). It reported a very dramatic loss of about $707 in the year 2008 compared with the earnings of the first quarter that was $2.3 billion whereby in response to this development that created to a stronger capital cushion. Wachovia then sold $8.05 of preffered and common stock in the mid year 2008 April and therefore announced a 41percent reduction of stock. The issues of Wachovia financial declining condition, including the credit deterioration in the Gold West mortgage portfolio. The losses of valuation security positions, and a series of other negative results that includes a total of $314 million of losses in Wachovia bank. Regulatory settlement of a total $144million that related to sale in and lease out leasing transaction and other determining factors which presided to an announcement on June 2, 2008 where Wachovia had terminated the Chief Executive Officer Mr. Kennedy G . Thompson. The board of directors of Wachovia a new Chief Executive Officer Mr. Lanty . Smith who was the Chairman and on the 9 of July, Wachovia then named Mr. Robert K. Steel to be the Chief Executive Officer and president of the company Fargo, Wells, (2010). On the same year. On July 22 Wachovia however reported a loss of about $9.1 billion including a $6.1 billion related to a goodwill. And a loss of about $5.6 in provision that is reflecting to a continuining worsened housing and economic conditions and anticipated future losses on its loan portfolio, primarily in the Golden West mortgage portfolio. In the same time, Wachovia in its quarterly manifesto reduced its common stock to 86 percent to $ 0.05 per share and a series measure that was announced. By early September it was on track for a $ 20 billion reduction on securities in the year 2008 and also loan balances. The series of events significantly created turmoil as the market participants was affected by search events, including Wachovia. The consequences in the days following the September 15 announcement that was in regard to the cost borrowing together with the deteriorating conditions in the U.S. The CEO scheduled a telephonic board meeting in the year 2008 on September the 16, so as to review the events with the board of directors and their effects. I the meeting, the board however discussed on the: 1. The pursuit of the strategic announcement in the July for the preservation and the protection of capital and also liquidity by continuing to reduce risks. 2. To however sell assets or either businesses. 3. To raise $10 to the $15 billion in capital. 4. To have a combination of section 2 and 3 respectively. 5. An investment in Wachovia by a very huge investor with amo0unt of between 20 to 40 percent of Wachovia voting equity. 6. To have a combination with a different financial company. After discussions the board of directors resolved unanimously the merger agreement at approximately 7:00 a.m. on October3. References Fargo, Wells (2008, November 2). Calculated Risk. Calculatedriskblog.com. Retrieved November 16, 2011, from www.calculatedriskblog.com/2008/11/well-frago-and-wachovia-backgraound-of.html Fargo, Wells (2010). Wells Fargo History. Wellsfargohistory.com. Retrieved November 16, 2011, from www.wellsfargohistory.com Read More