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Charlotte
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Discussion Starter · #1 · (Edited)
This is a “huge” deal for Wachovia and further solidifies the company as one of the largest financial institutions in the world. In the long run, this is good for Charlotte. However, this is bittersweet news for me. I have good friends in the East Bay and it is one of my all time favorite places. Everyone I know there has been real excited the past few years because the area is beginning to realize a much needed renaissance. I sure hope this isn’t that much a blow to their economy. And I be damn if the A’s aren’t talking about moving out of Oakland too.

Wachovia buying into West
Deal is the largest ever for Wachovia and adds a key piece for the Charlotte-based company to sell financial products nationwide

BINYAMIN APPELBAUM AND
RICK ROTHACKER

Wachovia Corp. will buy California-based Golden West Financial Corp. for $25.5 billion in cash and stock, the company announced late Sunday.

The deal is the largest ever for Wachovia, adding a key piece to Chief Executive Ken Thompson's methodical construction of a company that sells financial products nationwide.

It would expand Wachovia's network of bank branches in lucrative California, and give the bank a beachhead in other fast-growing western states, including Arizona and Colorado.

The Charlotte company would also double the size of its mortgage lending business.

"We believe this combination of our two companies, both known for exceptional customer service and pristine credit quality, will generate superior long-term growth in earnings per share," Thompson said in a statement.

The deal needs regulatory and shareholder approval.

Wachovia would increase its assets, the standard measurement of a bank's size, to about $669 billion from about $542 billion, although it would continue to rank as the nation's fourth-largest bank.

It is the third big deal for Thompson, whose First Union Corp. bought the old Wachovia Corp. in 2001 for about $14.9 billion. Three years later, he bought SouthTrust Corp. of Alabama for roughly the same price, bulwarking Wachovia's position as the dominant bank in the southeastern U.S.

Since then, Wachovia's executives have publicly craved the chance to compete in California.

In September, Thompson announced the purchase of a bank with 19 branches in the southern part of the state. Executives then said they planned to build 200 branches throughout the state over the next five years. They also said that they were not ruling out acquisitions.

In buying Golden West, Wachovia would get the sixth-largest bank in California, with about 120 branches. Wachovia has also focused recently on diversifying the types of loans that it sells. Golden West is one of the largest sellers of home mortgage loans with adjustable interest rates, not a strength for Wachovia.

Golden West is primarily the holding company for World Savings Bank, which operates branches in 10 states and mortgage lending offices in 39 states -- although its business is heavily concentrated in California. The Oakland company has about 10,500 employees and posted profits of $1.49 billion in 2005.

Golden West is run by Herbert and Marion Sandler, a married couple who created the company in 1963 and still own about 10 percent of its shares. The Sandlers are now in their 70s, and a source said the company had been seeking a buyer for several months.

Golden West approached Wachovia about three weeks ago, the source said, after unsuccessful talks were held with London-based HSBC Group Plc and New York-based Citigroup Inc. The source requested anonymity because the talks were confidential.

The timing was complicated for Wachovia. The company was hosting this week's PGA Tour event, the Wachovia Championship, at Quail Hollow Club. Thompson was scheduled to present the trophy to the winner of the tournament on Sunday afternoon.

The Wachovia board met Sunday mostly by phone and signed off before Thompson left for Quail Hollow Club around 2 p.m., said another source. Golden West's board agreed to the acquisition later on Sunday.

Wachovia has been praised by analysts in recent months for refraining from several possible acquisitions. Stock prices often suffer when companies make big deals, and Wachovia has tried to reassure investors that it would think carefully before buying.

The Wachovia board met several times and asked a lot of questions before finally agreeing to the deal, a source said. Thompson had passed on a number of big deals before deciding this one met his financial and strategic criteria, the source said.

Wachovia is paying a modest premium for Golden West, although it is betting that a slowing mortgage market will not overly depress the company's revenues. The company noted that Golden West has a strong history of weathering downward cycles in mortgage sales.

Like other large banks, Wachovia also touts its ability to sell a range of products to its customers -- and likely believes it can make Golden West's branches much more profitable.

News of the deal still raised eyebrows among analysts.

"I am surprised and a bit disappointed," said Nancy Bush, of NAB Research, a South Carolina firm. "The street is looking for them to be out of the deal business."

http://www.charlotte.com/mld/charlotte/business/14525326.htm
 

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Charlotte
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Discussion Starter · #2 ·
GOLDEN WEST FINANCIAL CORPORATION
Fortune 500 Company number 326
Assets: $124.6 billion (14th Largest US Bank Holding Company)
Headquarters: Oakland, CA





 

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Hey guys. I'm with Wachovia. I moved from Dallas to Nashville to take a new position in our return here. Now that the cat's out of the bag, here's some public information:

Let me just say that this will be good for the company, but it will take time. We paid a huge premium to get into western markets.

This move had three primary purposes:
1. Buy GW's mortgage expertise
2. Buy a western presence
3. Defend Wachovia against a possible acquisition (like the persistent rumors about Chase)

Of course the analysts don't like this b/c they're short term oriented. Obviously, this acquisition will tie up capital for a few of years too. There's even talk of a delay or reduction in size to our new tower.

It's not all bad for East Bay either. The Sandlers are very "family oriented" and they negotiated to keep a sizable presence in Oakland. Much of the mortgage business in Charlotte will be moving there. Wachovia bought GW for its expertise in mortgage origination too. So it would be a huge mistake to eliminate the successful operations they already have.
 

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Insighter said:
There's even talk of a delay or reduction in size to our new tower.
Are you talking about the tower in Charlotte that they started construction on a few months ago and made public commitments that it will be at least $800M. The tower that will not house any people from the mortgage unit?
 

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King of the Queen
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which tower?

also, i agree nostyle. we've taken over quite a number of f500s and not one would show on paper. we just take them all. banks rule. ;)
 

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Even with this merger, Wachovia is still half the size of BofA and JP Morgan Chase. BofA has assets totaling around $1.4 Billion and JPMC has about $1.3 Billion.
 

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Uptown Bound
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PrettyHairShawn said:
Even with this merger, Wachovia is still half the size of BofA and JP Morgan Chase. BofA has assets totaling around $1.4 Billion and JPMC has about $1.3 Billion.
Don't you mean trillion?

And, although Wach is still half the size of BofA, it is now unacquireable, meaning Wells Fargo could never take it over. Wachovia was larger than Wells Fargo prior to the merger and this widens the margin greatly.
 

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I meant Trillion, lol. Actually it depends on how you look at it, but to the banking industry, the size of the banks are measured by its assets first then deposits second, however the stock market looks at market capitalization. Well Fargo was larger than Wachovia according to its market capitalization. Wells Fargo's market capitalization is at $102 billions. If Wachovia was to ever get bought out, some financial institution would have to shell out at least $117 billions, Wachovia's market capitalization with the purchase of Golden West Financial.
 

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With the news of Wachovia's purchase of GWF, some are speculating that Wells Fargo might be pressured to make an purchase. Like Wachovia, Wells Fargo might be tempted to have a national presence and the likely target is Suntrust. The scenario of a Wells Fargo and Suntrust merger would raise Wells Fargo market capitalization by $26 billions, totaling about $128 billions, still would have a higher value than the Wachovia+GWF market capitalization. But a likely scenario like, Wells Fargo's assets will still be below Wachovia's by a few billions.
 

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Sic Semper Tyrannis
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I would say Suntrust or BB&T will be next on the list....Unfortunately. Whatever happened to Crestar?
 
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