Wachovia Corp. agreed to sell itself to Wells Fargo & Co. in a $15.4 billion takeover that will require no government assistance, scrapping a federally backed deal with Citigroup Inc.

The Wells Fargo offer is for $7 a share in stock, based on Thursday’s closing price, 79% above where Wachovia shares finished. Wells Fargo also will assume Wachovia’s preferred stock and debt.

In conjunction with the deal, Wells Fargo will issue $20 billion in new securities, mainly common stock. Shares of Wachovia and Wells rose in morning trading, while Citigroup shares fell.

The Wachovia/Wells Fargo deal comes four days after Wachovia and Citigroup reached a $2.16 billion agreement in principle to sell its banking operations to Citigroup.

The development is bad for Citigroup, as it highlights weak spots at the New York banking giant and challenges the notion that it has moved solidly from the problem category to the solution camp as the financial crisis unfolds.

A short while after the news broke, Citigroup said Wachovia’s agreement to a transaction with Wells Fargo “is in clear breach of an exclusivity agreement between Citi and Wachovia.” Citi says “Wells Fargo’s conduct constitutes tortious interference with the Exclusivity Agreement.”

(Wall Street Journal)