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 California banks are hot right now and Wachovia Corp. isn't wasting a moment grabbing them. What's more, its latest strategic acquisition could arguably take the No. 4 U.S. lender into much closer competition with the reigning three kings: Citigroup Inc., J.P. Morgan Chase & Co. and Bank of America Corp., all roughly twice its size.
BRANCHING OUT, BUT WITH AN EYE ON THE BALL Adding to its rapidly expanding West Coast holdings, Wachovia agreed Monday to pay $25.5 billion for Oakland, Calif.-based Golden West Financial Corp., its largest-ever purchase. This is Wachovia's fifth significant deal in recent months as it has looked for ways to expand its presence in profitable niches and compete with the three largest lenders, who seem to be standing still.
ELSEWHERE IN CALIFORNIA Other California assets have also drawn big prices recently.
INDUSTRY SPOILERS Meanwhile, Wachovia competitors have been modestly busy, but the acquisitive lender might just sneak up on them and emerge as a significant threat.
THE FALLOUT Wachovia's news met mixed reviews Monday. Some investors called the huge sticker-price risky and costly, others pointed to integration difficulties and message boards teamed with varied reaction. One Yahoo poster looks optimistically ahead: "The two deals that WB did in California (Westcorp and now Golden West) have some of the best managements and operations in the industry. It is very difficult to see how, longer term, these deals won't work out very profitably. Yes, there will be arbitrage selling pressure, and the stock has traded poorly today. Two years from now the selling will be a small blip on a chart, and the company will have gained great positioning in a strong market." Others, fearing downgrades, urged shareholders to sell Monday afternoon. Shares in Wachovia traded down 6.82% at $55.34 apiece, on the New York Stock Exchange late Monday, while Golden West shares traded up 6.17% at $74.86 each. Meanwhile, this could signal more dealmaking for Wachovia. Its financial adviser, Wachovia Securities, has likely freed up some time after its client, Ameristar Casinos Inc. pulled itself out of the never-ending bidding war for casino group Aztar Corp. last week. THE NUMBERS As a result of the Golden West deal, 55% of the U.S. population will have access to a Wachovia bank, the North Carolina institution said Monday.--Carolyn Murphy
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