Bank of America To Become One of Nation’s Largest Credit Issuers
Yesterday, Bank of America announced that it will become one of the largest credit issuers in the United States as it acquires MBNA Corporation.
It is a $35 billion deal at $27.50 per MBNA share. MBNA shareholders will receive 0.5009 shares of Bank of America common stock for each of their shares, as well as $4.125 in cash for each share.
Its “not only about the creation of one of the world’s largest card providers. That is compelling in and of itself,” said Bank of America Chairman and CEO Kenneth D. Lewis. “But it’s really a much larger story about two companies with complementary strengths. The result will be the country’s top retailer of financial services with the size and scale to drive distribution and marketing efficiencies.”
“This acquisition makes strategic sense for our combined customers and shareholders. It provides us access to MBNA’s attractive portfolio as well as their leading product, service and marketing capabilities,” said Lewis.
After this transaction, Bank of America will manage 40 million active accounts as well as $143 billion in outstanding balances. They will also add 20 million new customer accounts.
“We can now deepen existing and future customer relationships with differentiated capabilities to exceed customer expectations and grow market share,” he added. “This merger also provides us with an attractive foothold in Canada, the United Kingdom, Spain and Ireland.”
According to a press release, Bank of America expects to achieve overall expense efficiencies of $850 million after-tax, which would be fully realized in 2007, and anticipates a restructuring charge of $1.25 billion after-tax. Cost reductions will come from a range of sources, including the reduction of 6,000 jobs. Additional savings will be achieved through the elimination of overlapping technology, vendor leverage, and marketing expense.
“The merger will create one of the largest credit card portfolios and will give the combined company access to new marketing channels, customers, products and opportunities for further expansion,” said MBNA President and CEO Bruce Hammonds. “Both companies benefit as cross-sell opportunities exist to sell MBNA products to Bank of America customers and Bank of America products to MBNA customers.
Bank of America says that the deal would today make it the fourth most profitable company in the world. The deal is expected to reach completion in the fourth quarter of 2005.