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PNC » Topics » Our pending acquisition of National City presents substantial risks and uncertainties, which could limit our ability to realize the anticipated benefits from this transaction.

This excerpt taken from the PNC 10-Q filed Nov 6, 2008.

Our pending acquisition of National City presents substantial risks and uncertainties, which could limit our ability to realize the anticipated benefits from this transaction.

On October 24, 2008, we entered into a definitive agreement to acquire National City through a merger of National City into The PNC Financial Services Group, Inc. See Note 17 Subsequent Events included in the Notes To Consolidated Financial Statements under Part I, Item 1, of this Report for additional information. Closing of this merger is dependent on customary conditions, including regulatory and shareholder approvals. If we successfully complete this transaction, it presents the following risks to PNC, as well as those more generally described in Part II, Item 1A of our Form 10-Q for the quarter ended March 31, 2008:

  •  

As of the date of this filing, we do not have required regulatory approvals for this transaction. It is

 

possible that we will receive such approvals subject to conditions that affect the profitability of the acquired businesses to us, including as a result of the antitrust review of this acquisition.

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Like PNC, National City is a large financial institution and has retail and other banking operations in numerous markets in which PNC has little or no experience. As a result, the integration-related risks are greater than in our recent acquisitions. In particular, successful integration may be hampered by cultural differences between the two organizations.

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PNC and National City have operated and, until the completion of the merger, will continue to operate as separate independent entities. The integration process may result in the loss of key employees, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect our ability to maintain relationships with clients, customers, depositors, and employees or to achieve the anticipated benefits of the merger. Integration efforts between the two companies will also divert management attention and resources.

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In recent periods, National City’s results have been impacted negatively by a significant amount of asset impairments. Our results following the acquisition will depend on our ability to dispose of or otherwise appropriately manage these assets.

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National City’s recent financial performance and resulting stock price performance have led to several lawsuits and governmental investigations, and more may be commenced in the future. Upon its acquisition by PNC, we will bear the risks associated with lawsuits and governmental investigations, the extent and potential adverse impact of which cannot currently be predicted.

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As a result of this acquisition, the amount of securities we are issuing to the United States Treasury is based on the combined risk-weighted assets of PNC and National City and is greater than the amount we would be able to issue if we did not acquire National City. The risks posed by this issuance are thus greater than they would have been if we did not acquire National City. See discussion below.

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