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PNC Deal to Take Over Riggs Unravels

The collapse throws into doubt the future of the D.C. bank, which sues as former suitor cuts offer.

February 08, 2005|From Bloomberg News

Riggs National Corp., which last month admitted to helping some customers hide millions of dollars, said Monday that its $779-million agreement to be acquired by PNC Financial Services Group Inc. had collapsed.

The deal unraveled after PNC slashed its July offer by at least 17% to $20.15 a share and Washington-based Riggs sued, saying it was seeking new suitors. PNC also refused to complete the takeover unless Riggs, led by Chairman and Chief Executive Robert Allbritton, first settled at least one lawsuit and set aside funds for other litigation.

The development throws into doubt the future of Riggs, a Washington institution that helped finance the U.S. government's 1867 purchase of Alaska from Russia and became the bank of choice for many embassies and diplomats. Riggs, which already has paid at least $25 million in fines and agreed to close its international operations, lost more than half its market share for deposits in the District of Columbia through June.

Riggs shares dropped $1.40, or 6.6%, to $19.85 on Nasdaq, the stock's biggest decline since October 2002. Shares of Pittsburgh-based PNC, Pennsylvania's biggest bank, climbed 38 cents to $54.58 on the New York Stock Exchange.

Riggs Bank, a unit of Riggs National, pleaded guilty Jan. 27 to charges that it helped former Chilean dictator Augusto Pinochet and the leaders of oil-rich Equatorial Guinea hide hundreds of millions of dollars. The plea followed a yearlong money-laundering probe.

The federal judge hearing the case questioned whether the $16-million fine that Riggs agreed to pay in negotiations with prosecutors was large enough.

PNC sought to revise the terms of its July agreement to buy Riggs for $24.25 a share. It's now offering $19.32 a share, a figure Riggs National said could be reduced further, plus a "contingent security" of as much as 83 cents a share, for a total of about $637 million.

Riggs said its domestic banking business was stable and accused PNC of proposing new terms that the Pennsylvania bank knew would be unacceptable in order to scuttle the merger. Riggs said it had been damaged by PNC's decision.

The Washington bank said it spent six months preparing for the merger and taking steps at PNC's insistence. It filed suit in Superior Court for the District of Columbia, seeking damages or an order for PNC to proceed with the purchase according to the original terms.

PNC vowed to "seek full redress of our rights" should Riggs not drop its suit.

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