WASHINGTON - SHAREHOLDERS of Wachovia on Tuesday approved a takeover by Wells Fargo, clearing the way for a deal creating the largest US bank in terms of deposits.

The deal, announced on October 3, is expected to be completed by the end of December, the firms said.

California-based Wells Fargo announced the acquisition valued at the time at US$15.1 billion (S$21.9 billion) in shares as Wachovia appeared on the brink of collapse from bets on the real estate market.

That deal was announced after Citigroup had offered to pay US$2.16 billion in stock for Wachovia's banking activities and some of its debts, in an arrangement brokered by US authorities to avert a disruption in the banking sector.

Citigroup had initially tried to block the tie-up, claiming Wachovia illegally backed out of the earlier merger agreement and that Wells Fargo interfered with its exclusivity. Citi later dropped efforts to block the deal but indicated it would sue for damages.

The merger with Wells Fargo was approved by 76 per cent of the share owners.

'We are pleased that Wachovia's shareholders agree that the Wells Fargo/Wachovia combination will provide superior growth and long-term value to shareholders, customers, employees and our communities,' said Mr Robert Steel, chief executive of Wachovia.

'We believe our combined company will be a compelling value for Wachovia shareholders - and today's vote shows they agree,' said Wells Fargo president and CEO John Stumpf.

'Shareholders' approval is a major step toward completing the merger and we now look forward to the official merger of our two companies a week from tomorrow. The actual merger integration of our companies' systems, operations, products and services will be done very thoughtfully and deliberately over the next two to three years'.

Wachovia, the fourth-largest US bank by assets, with headquarters in Charlotte, North Carolina, faced a near collapse of its share price and weakening confidence because of its exposure to the subprime mortgage crisis.

The planned acquisition by Wells Fargo - which traces its roots to the Wild West and the 19th century gold rush in California - would give it the biggest network of branches in the United States.

Wachovia on October 22 posted a third-quarter net loss of US$23.89 billion, taking steep write-downs and the terms of its acquisition by Wells Fargo.

The battle for Wachovia was part of the great redrawing of the US financial landscape because of losses linked to the subprime housing market.

Wachovia had been in danger of failure after its shares lost more than 70 per cent of their value in a year, as investors feared a panic run on the beleaguered institution.

Many thought the once fourth-biggest US bank by assets would share the fate of its rival Washington Mutual, which was seized by the government and sold to investment bank JPMorgan Chase in one of the biggest-ever US bank failures. -- AFP