Citigroup: Breakup fee, forced merger, or nothing?

Can Citi stop Wells Fargo's bid for Wachovia?

Excerpt:

Citigroup (NYSE: C) looks like it's trying to get a breakup fee in exchange for giving up on its deal for Wachovia (NYSE: WB). Citi persuaded a New York judge to extend an exclusivity agreement between Citi and Wachovia -- which prohibited Wachovia from talking to other suitors -- through at least October 10th when the parties are scheduled to meet with the judge. Citi can either offer a higher price than its rival, Wells Fargo (NYSE: WFC), or it can negotiate a breakup fee to soothe its hurt feelings.

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Citi -- whose stock lost 18% of its value on Friday -- is seeking $60 billion in damages from Wells. I would not be surprised if Citi received less than that in a settlement. But I would be rather shocked if Citi -- which did not have a formal merger agreement with Wachovia -- comes back with a bid that offers more to Wachovia shareholders and to the FDIC than the Wells proposal.

Comment: My take is: Citi can't match the Wells Fargo offer. The courts will recognize the fiduciary responsibility of the board and the benefit to stockholders. Citi may get a breakup fee but it won't be much