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It's all set, PNC now in DC

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This has been off again on again since last year but it looks like the troubled Riggs finally agreed with PNC. This purchase will expand Pittsburgh based PNC into DC/Maryland and Virginia, and make it stronger and more able to fight off any takeover bid. PNC operates branches from Indiana and Kentucky through Ohio, WV, Pennsylvania and New Jersey.

PNC buying Riggs Bank at a 16% lower price

Friday, February 11, 2005

By Len Boselovic, Pittsburgh Post-Gazette

PNC Financial Services Group's stormy courtship of Riggs National ended amicably yesterday when the troubled Washington, D.C., bank agreed to be acquired for $652 million, a 16 percent discount to its original asking price.

Analysts said the lower price tag reflected the deterioration in the value of the Riggs franchise since the deal was announced in July and Riggs' realization that it wouldn't get a better offer from another suitor.

"It may be a combination of both," said RBC Capital Markets analyst Gerard Cassidy.

The acquisition of Riggs gives Pittsburgh-based PNC a foothold in what James E. Rohr, PNC's chairman and chief executive officer, termed "the extremely appealing Washington, D.C. marketplace." Riggs has 51 branches, in the capital, Virginia and Maryland.

Riggs shareholders will receive 6.4 million shares of PNC stock and $286 million in cash under the revised terms of the deal. They were originally to have received cash and stock valued at $779 million.

"We believe we have reached a revised agreement that is fair to all parties," Rohr said in a statement yesterday.

Acquiring Riggs builds on an East Coast presence PNC fortified last year when it acquired UnitedTrust Bank of Bridgewater, N.J., for $681 million. United Trust had assets of about $3 billion. Riggs had assets of $6 billion at the end of the third quarter compared. PNC's assets totaled $80 billion.

PNC had second thoughts about paying $779 million for Riggs, which has been hurt by government allegations over money laundering and other matters. Last month, Riggs pleaded guilty to failing to file federally mandated reports of suspicious banking activity and agreed to pay a $16 million fine. It paid a $25 million fine last year for its involvement in a money laundering scheme.

Riggs took PNC to court on Monday in order to enforce the original terms of the deal. That lawsuit will now be dropped.

PNC still expects to earn the same rate of return as it did when the acquisition was announced in July, he said.

Shares of PNC fell 13 cents yesterday, closing at $53.15. Riggs fell 62 cents to finish at $19.60.

Before being tainted by allegations that its international banking arm catered to former Chilean dictator Augusto Pinochet and other unsavory customers, Riggs' legacy included financing the Spanish-American War, the purchase of Alaska and construction of the U.S. Capitol.

Analysts yesterday didn't dispute the attractiveness of the Washington, D.C., market, but several questioned whether Riggs was the best entree into the region for PNC. They said other banks, including Baltimore-based Provident Bankshares, would have given PNC a better branch network than Riggs, without all the legal problems.

But a bank with fewer troubles would have been in a better position than Riggs to negotiate and could have demanded a stiffer price.

The price wasn't the only term renegotiated. Language of the agreement was changed so that PNC will not inherit Riggs' guilty plea for violating the Bank Secrecy Act. A judge still has to approve the plea agreement. A sentencing hearing is scheduled for March 29.

If the guilty plea came along with the rest of Riggs, PNC could lose business from customers who have restrictions on banking with convicted felons.

The purchase is expected to be completed as soon as possible. Either bank may terminate the agreement if the sale is not completed by May 31.

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PNC I have heard does operate a nationwide ATM system. Never really got the full reach of it. I do know that PNC has an agreement with the nations largest mall operator to have PNC ATMs in all their malls.

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