This excerpt taken from the PNC 8-K filed Jul 19, 2007.
PNC TO ACQUIRE STERLING
PITTSBURGH, July 19, 2007 The PNC Financial Services Group, Inc. (NYSE: PNC), with $126 billion in assets, announced today that it has signed a definitive agreement to acquire Lancaster, Pa.-based Sterling Financial Corporation (NASDAQ: SLFI), with approximately $3.3 billion in assets, for $565 million in stock and cash, or approximately $19.00 per share.
Sterling provides banking and other financial services, including leasing, trust, investment and brokerage, to individuals and businesses through 67 branches in Pennsylvania, Maryland and Delaware. Sterling has built a leading deposit share in several Pennsylvania counties, and subsequent to this transaction PNC expects to become No. 1 in deposit share in its central Pennsylvania footprint.
Sterlings strong deposit share and outstanding retail banking model make it an ideal fit for PNC. This acquisition provides a meaningful entry into several of the fastest growing Pennsylvania counties and joins our Pennsylvania markets of Harrisburg and Philadelphia to our new Greater Baltimore region, said PNC President Joseph C. Guyaux. The transaction meets PNCs disciplined guidelines for the deployment of capital, and we expect it to be accretive to earnings in 2009 with a 15 percent internal rate of return.
PNC conducted extensive due diligence of Sterling that included its books and records and an assessment of all legal actions pending against the company. Based on this due diligence, PNC believes that previously disclosed accounting issues associated with Sterlings Equipment Finance, LLC are confined to that unit. PNC expects to take a one-time after-tax charge of $28 million related to the closing of the transaction.
PNC anticipates having the capital flexibility to continue its current common stock repurchase program for 2007.
The acquisition is expected to close in the first quarter of 2008, subject to customary closing conditions, including regulatory approvals and approval by Sterling shareholders, with conversion planned for the third quarter of 2008.
Under the purchase agreement, which has been approved by the boards of directors of both companies, Sterling will merge into PNC. The transaction values each common share of Sterling stock at $19.00 based on PNCs closing NYSE stock price of $73.87 on July 17, 2007. The aggregate consideration for the Sterling common stock is comprised of approximately 4.540 million shares of PNC common stock and $224 million in cash and is based on 29.425 million shares of Sterling common stock currently outstanding. The consideration a Sterling shareholder will receive is equivalent in the aggregate to .1543 shares of PNC common stock and $7.60 in cash per share of Sterling common stock. Sterling shareholders will be entitled to elect to receive the merger consideration in shares of PNC common stock or in cash, subject to proration if either cash or stock is oversubscribed. All Sterling stock options have vested as a result of Sterlings agreement with PNC. Options not exercised by the closing date will convert to PNC options for the remaining term at the conversion date.
The actual value of the purchase consideration to be paid upon closing to each Sterling shareholder will depend on the average PNC stock price shortly prior to completion of the merger, and the cash and stock components on a per Sterling share basis will be determined at that time based on the average PNC stock price so that each share of Sterling receives consideration representing equal value.
Sterling is a diversified financial services company. Its banking businesses include the Bank of Lancaster County, Bank of Hanover, Bay First Bank, PennSterling Bank, Bank of Lebanon County, Pennsylvania State Bank, and Delaware Sterling Bank & Trust Company. It also operates fleet and equipment leasing unit Town & Country Leasing. Sterling offers trust, investment and brokerage services through Sterling Financial Trust Company, Church Capital Management LLC and Bainbridge Securities, Inc.
PNC to Acquire Sterling Page 3
Keefe, Bruyette & Woods, Inc. and Sullivan & Cromwell, LLP, respectively, acted as the financial and legal advisers to Sterling. Sandler ONeill & Partners, LP and Wachtell Lipton Rosen & Katz, respectively, acted as the financial and legal advisers to PNC.
The PNC Financial Services Group, Inc. (www.pnc.com) is one of the nations largest diversified financial services organizations providing retail and business banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management; asset management and global fund services.