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Capital One to Purchase Hibernia

March 08, 2005|From Associated Press

Credit card issuer Capital One Financial Corp. has agreed to pay about $5.35 billion in cash and stock for Louisiana regional bank Hibernia Corp. in an effort to expand from direct mail marketing to branch banking outlets.

The deal would make the company the nation's ninth-largest consumer lender and would put it in the top 20 in terms of deposits, Richard A. Fairbank, Capital One chairman and chief executive, said Monday.

McLean, Va.-based Capital One has been eager to buy a commercial bank for some time to bolster its credit card distribution -- almost entirely through direct mail -- to compete with large institutions such as Bank of America Corp., which can sell cards through its 6,000 branches.

The boards of directors of Capital One and New Orleans-based Hibernia approved the deal Sunday, said Richard Woods, a Capital One spokesman.

Under terms of the deal, Hibernia shareholders would receive $33 for each share, split into 45% cash and 55% stock. That equals $15.35 in cash and an exchange of shares worth 0.2261 of each Capital One share.

The deal values Hibernia shares at a 24% premium based on the stock's closing price Friday of $26.57.

Hibernia shares soared $5.67, or 21.3%, to $32.24, while Capital One shares fell $2.08, or 2.7%, to $76. Both trade on the New York Stock Exchange.

Hibernia has more than $22 billion in assets, 293 branches and operations in Louisiana, Texas and Mississippi. It is the 36th-largest U.S. bank by market capitalization, according to data provider SNL Financial.

Pending regulatory and shareholder approval, the merger could be completed in the third quarter, Woods said.

Hibernia's foundation in Louisiana and recent expansion into the Dallas and Houston areas with "upper end, very impressive retail-focused branches" was an appealing mix, Fairbank said.

"This model appears to be just the type of thing we were looking for," he said.

In addition to more branches in Texas, Capital One plans to develop a debit card business and home equity credit lines, Fairbank said.

The combination of Capital One's information-gathering tools and brand name would improve Hibernia's services, said J. Herbert Boydstun, Hibernia's president.

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