This excerpt taken from the PNC 8-K filed Oct 24, 2008.
PNC to further strengthen capital position
PITTSBURGH, Oct. 24, 2008 The PNC Financial Services Group, Inc. (NYSE: PNC) and National City Corporation (NYSE: NCC) today announced that they have signed a definitive agreement for PNC to acquire National City for $2.23 per share, or an aggregate fixed amount of approximately $5.2 billion in PNC stock. Additionally $384 million of cash is payable to certain warrant holders. Total consideration approximates National Citys market capitalization as of the close of business on October 23, 2008. National City shareholders will be entitled to 0.0392 share of PNC common stock for each share of National City.
PNC plans to issue to the U.S. Treasury $7.7 billion of preferred stock and related warrants under the TARP Capital Purchase Program subject to standard closing requirements. The U.S. Treasury Department approval of PNCs participation enables PNC to further strengthen its capital position, resulting in an estimated pro forma Tier 1 capital ratio for the combined company of approximately 10 percent.
The acquisition of National City will increase our core deposit base to $180 billion, making PNC the fifth largest U.S. bank by deposits. At a time when core funding is key, we see our deposit strength as an important success factor. Upon closing the transaction, we will implement our successful business model and execute our strategies for managing risk, achieving cost efficiencies and growing high-quality revenue streams, said James E. Rohr, chairman and chief executive officer of PNC. We believe this strategic combination will continue PNCs efforts to build capital strength and shareholder value. We are also gratified that we have been selected to participate in Treasurys Capital Purchase Program, which has helped to put this transaction on a very solid footing.
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PNC To Acquire National City Page 2
The transaction has an estimated internal rate of return to PNC of more than 15 percent and is expected to be accretive to PNCs earnings in the second year. PNCs fair value adjustments and provisions for future losses of National Citys current loan portfolio will bring the cumulative impairment of these loans to approximately 17.5 percent. PNC will continue to liquidate non-core and impaired loans.
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.
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. The transaction is expected to result in the reduction of approximately $1.2 billion of noninterest expense through the elimination of operational and administrative redundancies.
Under terms of the agreement, PNC will acquire all outstanding shares of common stock of National City in a stock-for-stock transaction, which has been approved by the Boards of Directors of both companies. In connection with the transaction, National City has issued to PNC an option to acquire 19.9 percent of National Citys common stock that becomes exercisable under certain specified circumstances. Corsair Capital LLC, which owns approximately 7.8 percent of outstanding National City common shares, has agreed to vote all National City common shares it owns in favor of the deal and otherwise support the transaction. After closing, PNC intends to merge National Citys banking affiliates into PNC Bank and they will assume the PNC Bank name. The merged entity will have its headquarters in Pittsburgh.
Based on PNCs closing NYSE stock price of $56.88 on October 23, 2008, the transaction values each share of National Citys common stock at $2.23. The aggregate consideration is composed of a fixed number of approximately 92 million shares of PNC common stock. Additionally $384 million of cash is payable to certain warrant holders.
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PNC To Acquire National City Page 3
The transaction is currently anticipated to close by Dec. 31, 2008. The merger is subject to customary closing conditions, including both PNC and National City shareholders and regulatory approvals. Citigroup Global Markets Inc., JPMorgan Securities, Inc. and Sandler ONeill + Partners, L.P. acted as financial advisers to PNC, and Wachtell, Lipton, Rosen & Katz acted as its legal adviser. Goldman Sachs acted as financial adviser to National City and Sullivan & Cromwell LLP acted as its legal adviser, and Cravath, Swaine & Moore LLP acted as legal adviser to the Board of Directors of National City.