By Jonathan Stempel
NEW YORK, Nov 5 (Reuters) - Wells Fargo & Co said on Wednesday it plans to sell at least $10 billion of stock to help fund its purchase of Wachovia Corp, which will create the fourth-largest U.S. bank by assets.
San Francisco-based Wells Fargo previously said it planned to raise up to $20 billion to fund the all-stock purchase of Wachovia, which it valued at $15.1 billion upon announcing it last month. That value had fallen to about $13.6 billion by Wednesday's close because Wells Fargo shares have declined.
Wells Fargo said the $10 billion offering could grow, and the bank expects to price it on Thursday after markets close.
It said the transaction is unrelated to the $25 billion it is receiving by selling preferred shares to the government, as part of U.S. Treasury Secretary Henry Paulson's $700 billion industrywide bailout. Wells Fargo's market value was about $105.2 billion as of Wednesday's close.
The purchase would more than double Wells Fargo's size, creating a lender with $1.4 trillion of assets and 6,653 banking offices. Wells Fargo expects at least $5 billion a year of cost savings, and for earnings per share to increase at least 20 percent beginning in 2011.
'This has been the No. 1 deal on our radar screen for a very long time,' Wells Fargo Chief Executive John Stumpf said on a conference call.
Wells Fargo expects to complete its purchase of Charlotte, North Carolina-based Wachovia by year end.
Regulators in late September pushed Wachovia to find a buyer and avoid possible bankruptcy after losses soared on a portfolio of 'Pick-a-Pay' adjustable-rate mortgages that let borrowers pay less than the interest and principal due.
Wachovia last month projected $26.1 billion of losses on the $118.7 billion portfolio, but Wells Fargo said on Wednesday the total could reach $36 billion. Wells Fargo expects losses on Wachovia's overall $482.4 billion loan portfolio of $71.4 billion, down from an earlier $74 billion.
Stumpf said Wells Fargo plans to refinance some Pick-a-Pay mortgages, and 'used very conservative numbers' in projecting overall losses at Wachovia.
JPMorgan is arranging the stock offering, with Goldman Sachs & Co, Morgan Stanley, UBS and Wachovia Securities serving as joint bookrunners.
Wells Fargo shares closed Wednesday down $3.09, or 8.9 percent, at $31.68. They fell to $30.35 in after-hours electronic trading. The shares began the year at $30.19.
(Reporting by Jonathan Stempel; Editing by Bernard Orr, Richard Chang) Keywords: WELLSFARGO/ (jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Nov 5 (Reuters) - Wells Fargo & Co said on Wednesday it plans to sell at least $10 billion of stock to help fund its purchase of Wachovia Corp, which will create the fourth-largest U.S. bank by assets.
San Francisco-based Wells Fargo previously said it planned to raise up to $20 billion to fund the all-stock purchase of Wachovia, which it valued at $15.1 billion upon announcing it last month. That value had fallen to about $13.6 billion by Wednesday's close because Wells Fargo shares have declined.
Wells Fargo said the $10 billion offering could grow, and the bank expects to price it on Thursday after markets close.
It said the transaction is unrelated to the $25 billion it is receiving by selling preferred shares to the government, as part of U.S. Treasury Secretary Henry Paulson's $700 billion industrywide bailout. Wells Fargo's market value was about $105.2 billion as of Wednesday's close.
The purchase would more than double Wells Fargo's size, creating a lender with $1.4 trillion of assets and 6,653 banking offices. Wells Fargo expects at least $5 billion a year of cost savings, and for earnings per share to increase at least 20 percent beginning in 2011.
'This has been the No. 1 deal on our radar screen for a very long time,' Wells Fargo Chief Executive John Stumpf said on a conference call.
Wells Fargo expects to complete its purchase of Charlotte, North Carolina-based Wachovia by year end.
Regulators in late September pushed Wachovia to find a buyer and avoid possible bankruptcy after losses soared on a portfolio of 'Pick-a-Pay' adjustable-rate mortgages that let borrowers pay less than the interest and principal due.
Wachovia last month projected $26.1 billion of losses on the $118.7 billion portfolio, but Wells Fargo said on Wednesday the total could reach $36 billion. Wells Fargo expects losses on Wachovia's overall $482.4 billion loan portfolio of $71.4 billion, down from an earlier $74 billion.
Stumpf said Wells Fargo plans to refinance some Pick-a-Pay mortgages, and 'used very conservative numbers' in projecting overall losses at Wachovia.
JPMorgan is arranging the stock offering, with Goldman Sachs & Co, Morgan Stanley, UBS and Wachovia Securities serving as joint bookrunners.
Wells Fargo shares closed Wednesday down $3.09, or 8.9 percent, at $31.68. They fell to $30.35 in after-hours electronic trading. The shares began the year at $30.19.
(Reporting by Jonathan Stempel; Editing by Bernard Orr, Richard Chang) Keywords: WELLSFARGO/ (jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.