Hell Hath No Fury Like a Bank Scorned

We were engaged, damn it!

That's the essential line that Citigroup's lawyers --- in all likelihood from the New York powerhouse firm of Shearman & Sterling --- will be arguing when they file a lawsuit challenging the deal that Wachovia has cut with Wells Fargo.

Now, if this were a simple marriage, it would be a simple contract, and the prospective bride, under contract law, would be obliged to return the diamond ring.

Alas, this is not a marriage but a merger agreement, drafted by lawyers, so the question is not so simple. Citi will apparently argue that Wachovia has breached the "exclusivity agreement" between the two banks.

Here is what Citi itself has to say about the exclusivity clause, in a press release issued today: "The Exclusivity Agreement provides, among other things, that Wachovia will not enter into any transaction with any party other than Citi, and will not participate in any discussions or negotiations with any third party. The Exclusivity Agreement also provides that the parties would be irreparably harmed by any breach of the agreement and that the remedy of specific performance of the agreement is appropriate."

Ah, specific performance! That remedy has a familiar ring to it! Remember the Clear Channel case?

Last spring, two hedge funds duked it out with a group of banks --- the lead defendant was Citigroup, wouldn't you know --- because the banks wanted to back out of a $22 billion-dollar deal to buy the radio-station giant Clear Channel Communications.

In that case, the banks wanted to back out of the hedge-fund orchestrated deal. After some fireworks in testimony, the parties settled, and the perceived wisdom was that those highly paid lawyers would sharpen their pencils and make the fine print on the financing of such deals much more "Clear," so to speak.

Do we smell another specific performance trial in the offing? The devil, as they say, is in the details.

Here is Citi's own explanation of its September 29 "agreement in principle" to acquire more than $700 billion of assets in Wachovia's banking operations. At that time, it did not not mention the "exclusivity" clause.

And deal-making can at times make for odd bedfellows. In a filing with the Securities and Exchange Commission on Thursday, Citii reported that it had renewed $6 billion in credit, including
$500 million from, wait for it, Wells Fargo

Karen Donovan

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