Wachoviaand Wells Fargo & Co. that was announced earlier in theday. New York-based Citi says the proposal, which would supersedeits owndeal to buy Wachovia through an arrangement with the FDIC,constitutes a breach of agreement.

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"Citi has substantial legal rights regarding Wachovia and thistransaction," the company stated shortly after the Wachovia-WellsFargo announcement Friday morning. Citi, which began promoting itsown merger with Wachovia earlier this week, added that it hasalready provided liquidity to Wachovia that prevents it fromtalking to anyone else.

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Saturday night, Citi exercised those rights by obtaining anorder from a New York State Supreme Court judge blocking the dealbetween Wachovia and San Francisco-based Wells Fargo. Then afederal judge blocked the state order Sunday night, setting aTuesday hearing on the matter in a lower Manhattan courtroom.

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Wachovia issued the following statement Sunday: "Wachoviacontinues to believe its agreement with Wells Fargo, which involvesno government assistance, is proper and valid. The agreement is inthe best interests of shareholders, employees, creditors andretirees as well as the American taxpayers and it imposes no riskto the FDIC fund. Under that agreement, Citigroup is always free tomake a superior offer to Wachovia."

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Citi and Wells Fargo were lined up Sept. 26 to make an offer tobuy Wachovia, which has been saddled with billions of dollars inoption mortgage debt related to the faltering housing market. WellsFargo's approximately $15-billion bid, accepted by Wachovia's boardThursday night, amounts to seven times the amount offered by Citiin a deal announced last Monday that includes a $42-billion bailoutprovision by the FDIC.

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In a conference call later Friday, Wells Fargo Chairman DickKovacevich says his bank's deal to buy Wachovia will take some timeto complete, adding that its impact on shareholders needs to beconsidered. "All of these things have to be understood and we haveto be comfortable before we will ever make a decision," hesays.

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From a real estate standpoint, a deal between Wachovia and WellsFargo would have less overlap because both banks operate primarilyon opposite coasts. Citi, on the other hand, would run into someredundancy issues along the East Coast, particularly in Floridawhere both banks share a large presence. Wachovia has nearly 3,400branches and leases space in numerous office buildings in largercities.

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