PNC to acquire Royal Bank of Canada's U.S. operations for $3.45 billion

2011-06-21 00:29:14 GMT+7 (ICT)

PITTSBURGH, PENNSYLVANIA (BNO NEWS) -- The PNC Financial Services Group on Monday announced that it has signed a definitive agreement to acquire Royal Bank of Canada (RBC)'s U.S retail banking unit for for $3.45 billion, or $112 million discount to tangible book value.

Under terms of the agreement, PNC, which is based in Pittsburgh, Pennsylvania, will have the option to deliver to Royal Bank of Canada at closing up to $1 billion of the consideration in common stock, or 3 percent of PNC's outstanding common shares based on PNC's closing price of $57.79 on June 17.

Meanwhile, North Carolina-based RBC Bank (USA), which has approximately $25 billion in assets and 424 branches in North Carolina, Florida, Alabama, Georgia, Virginia and South Carolina, will increase PNC's existing network to 2,870 branches, ranking it 5th among U.S. banks.

PNC stated it was expecting the transaction to be accretive to earnings by the end of 2013 or sooner depending on the amount, if any, of the $3.45 billion purchase price paid in the form of PNC common stock.

The boards of directors of both companies have approved the transaction, which is expected to close in March 2012 and is subject to customary closing conditions, including regulatory approvals.

In addition, the transaction has an estimated internal rate of return to PNC in excess of 19 percent, while the purchase price is currently estimated at approximately 97 percent of RBC Bank (USA) tangible book value, based on its balance sheet as of April 30. It reflects a negative 0.6 percent deposit premium.

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RBC made a smart move. I fear the US economy will tank.