Wachovia Worth More If It's Broken Up, Ackman Says (Update1)

Bloomberg

By Josh Fineman and Margaret Popper

Oct. 6 (Bloomberg) -- Hedge fund investor William Ackman said Wachovia Corp., the lender at the center of a bidding war by Wells Fargo & Co. and Citigroup Inc., is worth more if it's split between the bank and brokerage business.

Ackman, speaking at the Value Investing Conference in New York today, said Wachovia acted properly when it accepted Wells Fargo's Oct. 3 offer, which trumped an earlier proposal from Citigroup to buy part of the bank. Wells Fargo should buy Wachovia's brokerage unit, Ackman said today.

``This company is worth more, in our view, if it's broken into pieces,'' Ackman said. ``It's worth more because of the tax benefits created from the separation. It makes sense for Citi to continue buying the banking subsidiary and it makes sense for somebody else to buy the holding company.''

Ackman, 42, said he bought 180 million shares of Wachovia last week, and sold 9.5 million shares on Oct. 3, a purchase that inserted him into a battle for Wachovia's deposits and branches. Wells Fargo's $15.1 billion offer was far more than New York-based Citigroup's $2.16 billion bid for parts of Wachovia, setting up a fight for a bank with 20 million customers and almost $450 billion of deposits.

Wachovia fell 41 cents, or 6.6 percent, to $5.80 as of 2:42 p.m. in composite trading on the New York Stock Exchange.

One solution would be for Citigroup to buy the banking subsidiary and for Wells Fargo to buy the holding company, with Well Fargo getting the asset management unit and brokerage network, Ackman said. The entire company may be worth $7.29 to $19.59 a share, he said.

Tax Refunds

``The value created when the businesses are separated comes from the fact that some tax attributes are created,'' Ackman said in a Bloomberg TV interview after the conference.

An acquirer would incur about $27 billion in losses, which could then be used to obtain tax refunds and to shelter income in the future, Ackman said. About $21 billion of losses would be created by the separation of the bank's businesses, because it would be sold for less than its tangible asset value, he said.

Ackman also said he made a ``small'' investment in American International Group Inc. in recent weeks at about the stock's current price. He said he's probably the tenth or 12th biggest holder of AIG.

AIG has ``incredible assets'' that it's trying to sell, Ackman said in the television interview.

AIG fell 12 cents, or 3.1 percent, to $3.74

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