Wachovia Corp. shareholders Tuesday approved its sale to Wells Fargo & Co., one of the final steps toward ending the independence of the sixth-largest U.S. lender.
Wells Fargo’s Oct. 3 acquisition agreement granted the San Francisco-based buyer 39.9% of the voting power in the transaction for Wachovia, whose roots date from 1879. A shareholder lawsuit aimed at blocking the deal, which plaintiffs’ lawyers described as unprecedented, was dismissed by a North Carolina judge Dec. 5.
Wachovia shares have plunged 90% since former Chief Executive Kennedy Thompson bought Oakland-based Golden West Financial Corp., the largest seller of option adjustable-rate mortgages, for $25 billion in 2006.
Losses tied to the loans helped push Charlotte, N.C.-based Wachovia within hours of filing for bankruptcy. Wells Fargo then outbid Citigroup Inc. for control, creating the biggest bank branch network in the U.S.
“Wachovia was known in the banking industry for decades for its high standards, but it made one tremendous mistake in buying into the mortgage market at the wrong time,” said Michael Walden, an economics professor at North Carolina State University in Raleigh.
Federal regulators in mid-September urged Wachovia to sell, prompting a Sept. 29 agreement to unload its banking businesses to Citigroup for $1 a share, or $2.16 billion. Four days later, Wachovia’s board changed course and agreed to sell the entire company, including its investment bank and securities brokerage, to Wells Fargo for $7 a share, pegging the value at $15 billion.
Wells Fargo estimates there will be $26 billion of losses from Wachovia’s $120 billion in option ARMs as borrowers default on the loans during the next few years.
Wells Fargo CEO John Stumpf plans to trim $5 billion in annual expenses with the deal, which makes Wells Fargo the second-biggest U.S. bank by deposits, rivaling Bank of America Corp. Stumpf’s new management team overseeing the combined companies includes one Wachovia executive among 11 members.
“I’m optimistic there will be a true effort to have the best of both companies,” Wachovia CEO Robert Steel said at the shareholders’ meeting in Charlotte.
Steel and three other Wachovia directors were elected Tuesday to Wells Fargo’s board, effective Jan. 1.
Wachovia’s current board chairman, Lanty Smith, won’t be on the Wells Fargo board.