N.C. Treasurer Richard Moore on Wednesday called the price Wells Fargo & Co. is paying for Charlotte's Wachovia “highway robbery.”
Later, he told the Observer that he wants Wachovia Corp. to continue as an independent company and that he supports a shareholder lawsuit protesting the bank's agreement to be bought by Wells Fargo.
Moore, who lost a bid for governor and is leaving office in January, also said he will instruct that Wachovia shares held by the N.C. pension fund be voted against the Wells Fargo deal.
The vote is expected in December, but Wells has virtually guaranteed that shareholders will approve the acquisition. Wachovia granted Wells preferred shares worth 39.9 percent of shareholder voting power.
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Last month, the New York law firm Wolf Popper filed a suit challenging that provision. On Wednesday, Moore sent a letter in support of the lawsuit to the judge who is scheduled to hear the case, Albert Diaz of the N.C. Business Court in Charlotte. The deal should move forward only if it is approved by Wachovia's public shareholders “in an unfettered vote,” the letter said.
“If that deal is so good, you shouldn't have to give away 40 percent of the vote,” Moore said.
Wachovia spokeswoman Christy Phillips-Brown said the lawsuit is without merit, and that Wachovia “intends to defend the case vigorously.”
Moore, who has gained prominence by using his pension-manager role as a bully pulpit for shareholders, is the rare voice among politicians criticizing the deal.
Moore said he's sure that Wells would be a good corporate citizen in North Carolina, but that an independent Wachovia would still be best for the state.
“I hope that the shareholders of Wachovia will vote against this deal, and I hope that every politician that North Carolina has at the state and federal level works as hard as they can for an independent Wachovia,” he told the Observer. “In my view, it's a fight worth fighting.”
He and other critics think that the government's $700 billion bank bailout could have helped Wachovia survive if it had come earlier. The original plan passed Congress on the day the Wells deal was announced. In mid-October, Federal Deposit Insurance Corp. chairwoman Sheila Bair said that the government's capital injection program for banks “definitely would have made a difference” for Wachovia if it had come earlier.
Some Wachovia shareholders have expressed outrage over the sale to Wells. At least one grass-roots group, Wachovia Vote No, has sprung up to oppose the deal. Another Charlotte shareholder, Robert H. Percival, said he hopes Moore's position will encourage other shareholders to vote against the merger.
“If they had waited a week, Wachovia would have qualified under this bailout,” said Percival, who is chairman emeritus of Percival McGuire Commercial Real Estate. “Wachovia's the fourth largest bank in the country. If the government is saving banks that are the eighth or ninth largest, why not go back and save No. 4?”
Added Moore: “Why does the government get to decide who wins and who loses?”
But it appears that Wachovia did try to remain independent in its final hours, only to be rebuffed by the FDIC. On the weekend of Sept. 27, the government was facilitating talks between Wachovia and two potential suitors, Wells and New York-based Citigroup. According to a recent Wells regulatory filing, Wachovia proposed its own “alternative transaction” in the early morning hours of Monday, Sept. 29. Instead of selling to Wells or Citi, it hoped to get assistance directly from the FDIC in exchange for a stake in the bank.
But after Wells temporarily backed out of the deal making, the FDIC favored the Citi deal over an independent Wachovia. The Charlotte bank's board was told it had to accept the agreement with Citi or allow the bank to fall into FDIC receivership and likely file for bankruptcy protection.
Citi planned to buy most of Wachovia for $2.16 billion with FDIC assistance, but Wells upset the deal with another offer on Oct. 2, which Wachovia's board accepted. The Wachovia-Wells deal is now moving forward, although Citi is suing Wells for damages.
At a rally last month to welcome Wells chief executive John Stumpf, Wachovia CEO Bob Steel told employees, “I think all of us might be disappointed that it's not going to be the way of an independent Wachovia going forward. That clearly was our plan.”
Still, he said, “I am completely convinced that the combination with Wells Fargo represents the best possible outcome for our company at this time.”
Wells will buy Wachovia in a deal originally valued at $15 billion or about $7 per share, though that price has fallen since the announcement because of a decline in Wells' share value. Though that's certainly more than the roughly $1 a share that Citi had offered, it's still a pittance compared to Wachovia's share price of about $40 a year ago.
In a CNBC interview early Wednesday, Moore said of Wells, “They know that it's highway robbery. They're getting a great deal.”
He told the Observer, “I think I've got a $25 stock that's about to be sold for $5 or $6, and I'd like a better deal.”
The N.C. pension fund owns 3.2 million shares of Wachovia, which is about 0.1 percent of its total portfolio. Wachovia shares have shed more than 85 percent of their value in the past 12 months.
Moore assured fund members in a letter last month that the N.C. pension fund can weather the current economic storm, thanks to conservative investing. The N.C. fund was down about 12 percent in the first three quarters of this year, compared to the S&P 500's decline of 24 percent.
Wells and Wachovia have virtually no overlap on the East Coast, which has encouraged Charlotte residents concerned about losing local jobs. However, it's almost certain that Wells will cut some Charlotte jobs. The San Francisco bank hasn't given estimates, though Stumpf told Wachovia employees at last month's Charlotte rally that his job is “to help all of you stay with the company.” He offered a similar message Wednesday to employees in Winston-Salem, after a breakfast meeting with former Wachovia chiefs John Medlin and Bud Baker.
With 20,000 local employees, Wachovia is the area's second-largest employer behind Carolinas HealthCare. Wells has already indicated that it plans to trim Wachovia's investment bank.
Wachovia's asset management unit, Evergreen Investments, manages some money for the N.C. pension fund. Moore said it's too early to say if that relationship would change should the Wells deal go through.
Moore did not seek re-election after two terms as treasurer because he ran against Lt. Gov. Bev Perdue for the Democratic nomination for governor. Perdue won the party's nomination in May and was elected governor last week.
Moore's successor, Democratic state Sen. Janet Cowell, was unavailable for comment Wednesday.