Bank of America to buy MBNA for $35 bln
Thursday June 30, 8:26 am ET
NEW YORK (Reuters) - Bank of America Corp.(NYSE:BAC - News) on Thursday said it agreed to buy MBNA Corp. (NYSE:KRB - News) for about $35 billion in stock and cash, making the No. 2 U.S. bank one of the world's biggest credit card issuers.
The transaction will double Bank of America's card base, giving it more than 20 million new accounts and bringing the combined company's card balances to about $143 billion with 40 million accounts.
"It's a perfect fit," said Ted Parrish, who manages the $1 billion Henssler Equity Fund and owns MBNA and Bank of America shares. "For Bank of America, it was the only big deal left for them to do. They really couldn't take over any more major banks."
The transaction values MBNA at $27.50 per share, a premium of 30.6 percent to MBNA's closing share price of $21.05 on Wednesday on the New York Stock Exchange.
MBNA shareholders will receive 0.5009 of a Bank of America share plus $4.125 in cash for each MBNA share.
It is second major acquisition engineered by Bank of America Chief Executive Kenneth Lewis since he took the helm in 2001. In April 2004, Bank of America acquired FleetBoston Financial Corp. for $48 billion.
Bank of America has about 10 percent of U.S. deposits, the maximum allowed.
Earlier this month, Bank of America agreed to take a 9 percent stake in China Construction Bank (CCB.UL) for $3 billion.
Bank of America, whose own card operations are highly profitable, said it plans to eliminate 6,000 jobs and take a $1.25 billion after-tax restructuring charge. It expects expense savings of $850 million by 2007. The transaction is expected to close in the fourth quarter.
Shares of Bank of America fell 91 cents, or 1.9 percent, to $46.00 in premarket trade on the Inet electronic network, down from a close of $46.91 on Wednesday on the New York Stock Exchange. Shares of MBNA rose $5.53 to $26.60 on Inet.
Bruce Hammonds, MBNA's chief executive, will become president of Bank of America Card Services, reporting to consumer banking chief Liam McGee.
Hammonds will remain in Wilmington, Delaware, where MBNA is based. Bank of America is based in Charlotte, North Carolina.
Hammonds and other senior MBNA executives survived a helicopter crash in New York's East River earlier this month. Their presence in New York led to speculation that they were meeting with bankers and lawyers about a possible transaction.
"Credit card companies are realizing they may not be able to make it just as a standalone," said Peter Boockvar, an equity strategist at Miller Tabak & Co., noting Washington Mutual Inc.'s (NYSE:WM - News) agreement earlier this month to acquire Providian Financial Corp. (NYSE:PVN - News) for $6.45 billion.
Keefe, Bruyette & Woods and the law firm Cleary Gottlieb Steen & Hamilton advised Bank of America on the transaction. UBS Securities, Joseph Perella and the law firm Wachtell, Lipton, Rosen & Katz advised MBNA.
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