Wachovia Corp., which catapulted to the top of the U.S. banking industry with relentless acquisitions of weaker rivals, was in advanced discussions Sunday night to sell itself to Wells Fargo & Co., according to people familiar with the situation.

Wachovia was also holding talks with Citigroup Inc., but by late evening Wells Fargo appeared to be the preferred bidder. Details of the proposed transaction weren't immediately clear, and the discussions could fall apart at the last moment.

The Wachovia developments came the same day that Congress and the Bush administration reached agreement on a $700 billion banking-rescue package. Meanwhile, the turmoil in the banking system spread to Europe over the weekend, as a major European bank was bailed out by a trio of governments, the U.K. was plotting the rescue of a British lender and Germany was trying to save a Munich-based lender.

San Francisco-based Wells Fargo has sent mixed signals in recent months about its appetite for acquisitions. CEO John Stumpf said in August that it was highly unlikely Wells Fargo would pursue a large East Coast rival.

Earlier this month, though, Wells Fargo Chairman Richard Kovacevich said that the bank "often buys fixer-uppers." He added: "Given the financial conditions today I feel like a kid in a candy store."

Citigroup and Wells Fargo both took a hard look at Washington Mutual Inc. before it was seized and sold to J.P. Morgan Chase & Co. for $1.9 billion.

Spain's Banco Santander SA also had expressed interest in Wachovia, but that scenario now appears less likely, people with knowledge of the discussions said Sunday.

The Netherlands, Belgium and Luxembourg agreed to inject $16.37 billion into Fortis NV on Sunday, after France's BNP Paribas SA and Dutch financial firm ING Groep NV walked away from talks to acquire the company over the weekend. The rescue effort came after Fortis's shares came under heavy selling last week.

Click to read more at The Wall Street Journal