Citigroup buys the commercial banking assets of Wachovia for $2.2 billion in Citigroup stock. Also included are Wachovia's private bank, middle markets & investment bank. The retail brokerage arm and the mutual fund company are NOT included.
Citi plans on raising $10 billion in capital via common stock offering. In addition, Citi will cut their dividend in half ($1.28 to $0.64 per share)
Citigroup, in essence, buys puts on the mortgage stuff from the FDIC for $12 billion in preferred shares & warrants.
Citi really rescues the bondholders of Wachovia in this trade. More to come later.
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