Davis Polk & Wardwell is advising Citigroup Inc. on its acquisition of the banking subsidiaries of Wachovia Corporation in an FDIC-assisted transaction, creating the largest US bank by total deposits.

Under the terms of the agreement-in-principle, Citigroup will pay Wachovia approximately $2.16 billion in stock and assume Wachovia senior and subordinated debt, totaling approximately $53 billion. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC. In connection with the transaction, the FDIC has agreed to provide loss protection in connection with approximately $312 billion of mortgage-related and other Wachovia assets. Citigroup is responsible for the first $30 billion of losses on this portfolio, and is also responsible for the next $12 billion in losses up to a maximum of $4 billion per year for the next three years. The FDIC has agreed to be responsible for any further losses on this portfolio.

The Davis Polk corporate team includes partners John R. Ettinger, Phillip R. Mills, Michael Davis, Leonard Kreynin and Marc O. Williams and associates H. Oliver Smith, Scott D. Mitnick, Jeffrey M. Glasheen, Alexander N. Macleod (not yet admitted), Mark P. Holloway (not yet admitted) and Andreea Stan. Partners Randall D. Guynn and Arthur S. Long and associate Cristina Diaz are providing financial regulatory advice. Partner Michael Kaplan is providing capital markets advice. Partner E. Waide Warner Jr. and associate Damian S. Schaible are providing credit advice. Partners Avishai Shachar and Neil Barr and associate Catherine Paskoff Chang are providing tax advice. Partner Barbara Nims is providing employee benefits advice. All members of the Davis Polk team are based in the New York office.