(Robert) Rubin and Citigroup were eyeing Old Lane as an acquisition—not for high-yield returns, but for Pandit, a potential candidate to one day run Citi. In April 2007, Pandit sold Old Lane to Citi for $800 million, a price tag that boggled the minds of Wall Street observers. Pandit personally reaped a huge bounty, what amounted to $165 million in cash. With his windfall, he bought a ten-room, $17.9 million co-op apartment on Central Park West, the former home of the late actor Tony Randall. Rubin made little pretense about why Citi had spent so much money: He publicly called Pandit “a genius.”
...In September, the markets plunged along with the collapsing credit markets, and the foundation of Citigroup began to crumble. While Pandit had managed to accrue $60 billion in capital to shore up finances, it wasn’t near enough. Pandit was smart enough to know what needed to be done: He had to secure more access to cash, lots of it. As banks began to fail, he bid $1 a share for the commercial bank Wachovia, which the government was hoping to quickly marry off and save from dissolution. It was a cheap way to get access to cash deposits that could shore up Citi’s credit problems. As a deal drew near a close, Pandit appeared confident that he had achieved a much-needed victory.
Perhaps a little too confident. Pandit and Citi had relied on what amounted to the legal version of a handshake to secure the deal with Wachovia. And they dragged out the process while trying to separate Wachovia’s wealth-management division from the rest of the company, feeling it had too much overlap with Smith Barney. (Lew Kaden told a private group, “We’ve got 15,000 complainers, we don’t need 15,000 more.”) Pandit left just enough room for Wells Fargo to swoop in with a bid for $7 a share and snatch the bank out from under Citi.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports. Email the author at email@example.com