Citigroup Inc.'s takeover of Wachovia Corp. was torpedoed on Friday when San Francisco-based Wells Fargo & Co. agreed to pay $15.4 billion to buy Wachovia.

Wells Fargo's offer upended the government's hastily arranged effort last weekend to match New York-based Citigroup with Wachovia of Charlotte, N.C. -- a federal effort to prevent the bank from joining the growing ranks of failed financial institutions.

Wells...