PNC to Buy National City
Monday, November 03, 2008
The PNC Financial Services Group Inc. announced today that it has signed a definitive agreement to acquire National City Corporation. PNC will pay $5.2 billion in stock for National City, or $2.23 per share, an 18.9 percent discount from its Thursday closing price of $2.75. PNC will also make a $384 million cash payment to certain National City warrant holders.
PNC said it will receive an estimated $7.7 billion through the government's recently announced Capital Purchase Program, part of which will be used to fund the National City acquisition. DSNews.com reported on Wednesday, that the Treasury Department was encouraging the banking community to weed out struggling institutions by using acquisitions as a selection criteria in doling out capital injections.
Cleveland, Ohio-based National City is Michigan's fifth largest bank, with an estimated $10.5 billion in deposits and more than 1,300 branch offices. Earlier this week, National City reported a net loss for the third quarter of 2008 of $729 million, driven primarily by continued actions to build loan loss reserves, the bank said. On a year-to-date basis, National City has lost $2.7 billion in 2008, compared to net income of $647 million in 2007.
According to PNC, the merger will increase its core deposit base to $180 billion, making it the fifth largest deposit banking franchise in the United States. The combination with National City is expected to place PNC fourth among U.S. banks in number of branches. It will give PNC the No. 1 deposit share position in Pennsylvania, Ohio, and Kentucky and will rank the company No. 2 in Indiana and Maryland.
The transaction has an estimated internal rate of return to PNC of more than 15 percent and is expected to be accretive to PNC's earnings in the second year, the company said in a press statement. PNC said it estimates fair value adjustments and provisions for future losses of National City's loan portfolio will bring the cumulative impairment of these loans to approximately 17.5 percent. PNC will continue to liquidate the bank's non-core and impaired loans, PNC stated. The transaction is anticipated to close by Dec. 31, 2008.
PNC said it will receive an estimated $7.7 billion through the government's recently announced Capital Purchase Program, part of which will be used to fund the National City acquisition. DSNews.com reported on Wednesday, that the Treasury Department was encouraging the banking community to weed out struggling institutions by using acquisitions as a selection criteria in doling out capital injections.
Cleveland, Ohio-based National City is Michigan's fifth largest bank, with an estimated $10.5 billion in deposits and more than 1,300 branch offices. Earlier this week, National City reported a net loss for the third quarter of 2008 of $729 million, driven primarily by continued actions to build loan loss reserves, the bank said. On a year-to-date basis, National City has lost $2.7 billion in 2008, compared to net income of $647 million in 2007.
According to PNC, the merger will increase its core deposit base to $180 billion, making it the fifth largest deposit banking franchise in the United States. The combination with National City is expected to place PNC fourth among U.S. banks in number of branches. It will give PNC the No. 1 deposit share position in Pennsylvania, Ohio, and Kentucky and will rank the company No. 2 in Indiana and Maryland.
The transaction has an estimated internal rate of return to PNC of more than 15 percent and is expected to be accretive to PNC's earnings in the second year, the company said in a press statement. PNC said it estimates fair value adjustments and provisions for future losses of National City's loan portfolio will bring the cumulative impairment of these loans to approximately 17.5 percent. PNC will continue to liquidate the bank's non-core and impaired loans, PNC stated. The transaction is anticipated to close by Dec. 31, 2008.
