There’s another suitor in line for Wachovia Corp. (WB), and Citigroup Inc. (C) doesn’t like it. In fact, Citi has taken the lovers’ spat to Judge Judy proportions by calling Wachovia’s agreement to sell to Wells Fargo & Co. (WFC) a “breach of an Exclusivity Agreement” in a press statement Friday. Citi threatened to use its “substantial legal rights” gained over Wachovia in light of Monday’s Citi/Wachovia transaction. The outcry came just hours after Wachovia announced early Friday its planned sale to Wells Fargo. As part of the new deal announced Friday, Wells Fargo planned to raise $20 billion in capital, primarily via an offering of common stock, to offset what the company said it expects to be roughly $10 billion in acquisition and integration costs. Wachovia shares surged 66 percent premarket to $6.50, while Wells Fargo rose 1 percent to $35.50 and Citigroup fell 11 percent to $19.99. See the Wells Fargo statement. Wachovia officials said in a separate statement that Wells Fargo had presented a signed and board-approved offer late Thursday, and that the bank’s own board consented to the new offer yesterday as well. The new deal would mean that Wells will acquire all of Wachovia Corporation and all its businesses and obligations, including its preferred equity and indebtedness, and all its banking deposits. Days before the Wells/Wachovia announcement, regulators announced Citi’s acquisition of Wachovia’s assets and liabilities “on an open bank basis with assistance from the FDIC” as a preemptive measure to avoid Wachovia’s failure. Citigroup had granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing the risk of loss beyond the initial write-off. FDIC officials said they took the unusual move of backstopping the deal after consulting with the President and Treasury secretary Henry Paulson, noting that “open bank assistance was necessary to avoid serious adverse effects on economic conditions and financial stability.” In other words, waiting for Wachovia to fail wasn’t an option. Citi cited Monday’s events and said it was “negotiating in good faith and nearly completed the definitive agreements required to consummate the Citi/Wachovia transaction.” “The value of the Citi agreement to Wachovia shareholders was substantially in excess of Wachovia’s closing price on Thursday, October 2nd,” the press statement read. “Citi has also been providing liquidity support to Wachovia Bank since Monday’s announcement.” Despite the assistance, Wachovia pursued another suitor Friday in a move that surprised the public and upset executives at Citigroup. “Citi has demanded that Wachovia and Wells Fargo terminate and not proceed with any proposed transaction, any conduct in furtherance thereof, or any other act in violation of the Exclusivity Agreement,” Citi said. The Board of Governors of the Federal Reserve and the Office of the Comptroller of the Currency issued its own press statement Friday regarding the potentially explosive purchasing triangle. “The regulators will be working with the parties to achieve an outcome that protects all Wachovia creditors, including depositors, insured and uninsured, and promotes market stability,” the statement said. Disclosure: The author held no relevant positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.