Wachovia to Buy Westcorp

Irvine-based finance company Westcorp Inc. on Monday agreed to a $3.9-billion takeover by banking giant Wachovia Corp., in a stock-swap deal that would make Wachovia a national player in the auto-loan business and give it an initial foothold in the California bank market.

A deal between the two firms had been rumored for weeks.

Charlotte, N.C.-based Wachovia, the fourth-largest U.S. bank, said it expected to sell additional financial services to the 8,500 mainly used-car dealers for which Westcorp provides loans through its WFS Financial Inc. unit.

The deal also would allow Wachovia to expand its auto lending into the so-called near-prime and sub-prime markets -- making higher-interest loans to customers with credit blemishes, an area of expertise for Westcorp.

Ben Jenkins, president of Wachovia’s General Bank, said the purchase “moves our auto finance business to a new level.”

Westcorp has been making auto loans since 1972. Through its 84%-owned WFS Financial, Westcorp originated about $6.6 billion in loans last year.

Wachovia said Westcorp would become the hub of the bank’s auto finance business under WFS Financial Chief Executive Thomas Wolfe in Irvine.

Ernest Rady, Westcorp’s founder and chairman, would become chairman of Wachovia’s dealer financial services unit and also head the California banking unit. Westcorp has 19 retail bank offices in the Southland under the Western Financial Bank name. They would become Wachovia branches.

Jenkins described the regional banking market as “very attractive” but said Wachovia had no plans for a major banking expansion here in the near term.

Under terms of the deal, Westcorp investors would receive 1.2749 shares of Wachovia for each of their shares. Wachovia also would pay 1.4661 of its shares for each of the publicly traded WFS Financial shares.

Westcorp stock rose 23 cents to $61.58, WFS surged $5.23 to $70.15, and Wachovia lost 81 cents to $49.57.