PNC to Buy National CityFriday a.m. Update: Markets Plunge as Recession Fears Grow PNC Financial Services today announced plans to buy National City Corp., a Cleveland, OH-based banking group with more than 1,500 offices in nine states. PNC will pay $5.2 billion in an all stock deal, with the price of $2.23 a share, about 19 percent less than what National City closed at on Thursday.
This acquisition will make PNC the fifth-largest bank by deposits. The Pittsburgh-based lender says in a statement released before the opening bell that it will be able to buy the bank when it sells $7.7 billion of its own stock to the government through the Troubled Assets Relief Program (TARP), and that Treasury funding helped "put this transaction on a very solid footing." The U.S Treasury announced earlier this month that nine of the largest banks in the U.S. would receive $125 billion of the rescue plan, with a directive from Treasury Secretary Henry Paulson to deploy the money, including the buyout of troubled banks.
"The acquisition of National City will increase our core deposit base to $180 billion, making PNC the fifth-largest U.S. bank by deposits," said James E. Rohr, chairman and chief executive officer of PNC, in a statement. "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."
The 163-year-old National City, Ohio's largest bank, joins Washington Mutual Inc. and Wachovia Corp. in selling after losses tied to failed home loans, with more than $700 million in losses reported in its third-quarter report. National City posted more than $2 billion in losses over the past two quarters.
The U.S. stock market joined a worldwide selloff at Friday's open, with the Dow down about 400 points, as the tsunami of investor anxiety about a global recession sent equity markets heading for the exits for a fourth day.
The Dow fell more than 4.5 percent following the lead of plummeting markets around the globe with Japan's Nikkei index down 9.6 percent and European markets also dumping stocks, major indexes down 7 percent in London and 8 percent in France and Germany. Moscow's exchange suspended trading until Tuesday after its market slid more than 14 percent.
In other recession news, the U.K. government says its economy is on the brink of recession and confirms that its economy shrank by 0.5 percent in the third quarter, the first time it has contracted since 1992. In currency trading on Friday, the pound went into a nosedive against the U.S. dollar, and economists say the shrinking figures put Britain halfway into a technical recession, which is defined as two or more consecutive quarters of negative economic growth.