North Carolina Business Litigation Report

North Carolina State Treasurer Says Wachovia-Wells Fargo Merger is "Highway Robbery"

This morning on CNBC, North Carolina State Treasurer Richard Moore referred to Wells Fargo's pending acquisition of Wachovia as a "shotgun marriage," "highway robbery," and as not being fair to Wachovia shareholders.

The State Treasurer has a significant interest in this merger.  The North Carolina Retirement System was holding 2,275,664 shares of Wachovia stock as of June 30, 2008, which were then worth $35,341,062, per the State Treasurer's Annual Report.  At the $7 per share to be paid by Wells Fargo, that investment has lost nearly $20 million in value since June.

Moore said in a follow-up interview today with the Charlotte Observer that the shares held by the Retirement System will vote against the merger, and that he will send a letter supporting the shareholder lawsuit seeking to enjoin the merger.  He stated “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'll presumably send that letter directly to Judge Diaz, who is presiding over the lawsuit brought by Irving Ehrenhaus.  Moore won't be the first prominent citizen to do so, and he also won't be the first to use the word "robbery" to describe the pending deal. [Update: Moore did send his letter, on November 12, 2008].

The first person I know of to do that was John Georgius, who was President of First Union National Bank until 1999, two years before First Union became the surviving entity in its merger with Wachovia.  Georgius has already written a letter to Judge Diaz, expressing his objection to the merger, and stated that:

TO ALLOW THIS ACTION TO STAND WOULD CONDONE AND SUPPORT THE LARGEST 'BANK ROBBERY' IN OUR NATION'S HISTORY!

The capital letters are in the original.

And in another communication to Judge Diaz, William B. Greene, Jr., the Chairman of Bank of Tennessee, said that the only reason the Wachovia Board agreed to the merger was that they had been "beaten down and buggy whipped by the Regulators."

These letters, whether written or unwritten, obviously aren't evidence of anything probative to the legal issues raised by the shareholder class action.  But they certainly display a public sentiment that is strongly against this transaction, and make one wonder whether this deal would get the approval of  the majority of Wachovia shareholders if Wells Fargo didn't already have 40% of the vote locked up.

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Mack Sperling
Brooks Pierce, LLP
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