The PNC Financial Services Group, Inc. (PNC) said Friday it would acquire ailing Cleveland-based National City Corporation (NCC) for $2.23 per share, or an aggregate fixed amount of approximately $5.2 billion in PNC stock. The merger will create the nation’s fifth largest bank by deposits, with $180 billion in combined deposit base between the two banks; National City shareholders will be entitled to 0.0392 share of PNC common stock for each share of National City, according to a press statement by both firms. PNC said that the deal came as the firm will issue $7.7 billion of preferred stock and related warrants to the U.S. Treasury under the TARP Capital Purchase Program — PNC CEO James Rohr said that the TARP capital injection was needed to “put [the National City] transaction on a very solid footing.” In addition to ranking fifth nationally in deposits, 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. PNC expects to incur merger and integration costs of approximately $2.3 billion, it said; the merger will not be accretive to earnings until the second year, PNC officials estimated, and will likely cost a fair number of National City employees their jobs. PNC said it expects to reduce $1.2 billion of noninterest expense through “the elimination of operational and administrative redundancies.” “The combined company will have greater scale and scope, enhancing service to our customers and communities and providing greater opportunities for our employees. This transaction is about two companies that fit well together in terms of geography, products and services,” said Peter E. Raskind, chairman, president and chief executive officer of National City. Upon closing the transaction, Raskind will be appointed a PNC vice chairman, and one National City director will join the board of the combined company. National City will be absorbed into PNC, with current branches operating under the PNC name. The deal is expected to close by the end of the year. National City reported a third quarter net loss of $729 million earlier this week, as bad mortgages continued to eat away at the bank’s bottom line. For more information, visit http://www.pnc.com. 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.
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