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Wachovia Corp. has paid investment bank Goldman Sachs Group Inc. $77 million in fees since October 2006 for various advisory services and is set to pay another $25 million for advice involving the Charlotte bank's sale to Wells Fargo & Co., according to a filing Tuesday.
The $77 million covers work such as Goldman's assistance with Wachovia stock offerings as well as “financial advisory services since December 2007,” according to the filing. Wachovia, struggling with mounting mortgage losses, said in June that it hired Goldman to analyze its loan portfolio but hasn't provided a timeframe for the work.
Representatives for Wachovia and Goldman Sachs declined comment.
In its latest round of work, Goldman Sachs provided a “fairness opinion” to the Wachovia board on Oct. 3, saying the sale to Wells Fargo was fair financially to shareholders. These opinions are a routine part of mergers and acquisitions. For Goldman to receive the full $25 million fee, the sale must be completed.
The fairness opinion, however, comes with qualifiers. It couches the firm's findings within the context of the dire circumstances facing Wachovia at the time. After verging on collapse, Wachovia agreed, on the order of federal regulators, to a sale to Citigroup Inc. on Sept. 29, but then switched to Wells' $15 billion offer four days later.
The opinion notes many of Wachovia's travails, including the drying up of necessary financing and a loss of deposits that began in mid-July and accelerated in late September. Under the extraordinary circumstances, Goldman said it did not undertake some of the analyses it would do in a normal deal. But it concluded the sale was fair to shareholders, noting that in the event of a government takeover or a bankruptcy filing investors were likely to lose all or most of the value of their holdings.
Goldman is a former employer of Wachovia chief executive Bob Steel, who was recruited in July from a post at the U.S. Treasury Department. He has noted that Wachovia had hired Goldman before he came on board.
Investment bank Perella Weinberg Partners also gave Wachovia a fairness opinion on the Wells sale, according to the filing. That firm also will receive $25 million once the deal closes.
Wachovia, which has lost more than $33 billion in the first three quarters of this year, hasn't set a date for a shareholder vote. But Wells has said the purchase is expected to close Dec. 31.
