My finance view

PNC Financial Services Group Inc. this morning announced that it is buying National City Corp. for $2.23 a share, or $5.2 billion in PNC stock. The deal represents a 7.1 percent discount to National City’s Thursday closing price.

In addition, PNC said it would pay $384 million in cash to certain National City warrant holders.

To help support the deal, PNC is selling the federal government $7.7 billion in preferred stock and related warrants, tapping into the government’s $700 billion rescue plan for the nation’s banking system.

The acquisition of National City, which has 60 branches in the St. Louis area, will increase PNC’s deposit base to $180 billion, making it the fifth largest U.S. bank by deposits.

In addition to ranking fifth nationally in deposits, the combination with National City is expected to place PNC fourth among U.S. banks in number of branches. Pittsburgh-based PNC has no branches in the St. Louis area.

PNC said it expects to incur merger and integration costs of approximately $2.3 billion. PNC said it expects the merger will result in savings of $1.2 billion through the elimination of operational and administrative redundancies.

Under terms of the agreement, PNC will acquire all outstanding shares of common stock of National City in a stock-for-stock transaction, which has been approved by the boards of both companies http://full-free-credit-report.com.

Based on PNC’s closing stock price of $56.88 on Thursday, the exchange of 92 million shares values each share of National City’s common stock at $2.23. The transaction is currently anticipated to close by Dec. 31. The merger is subject to approval by shareholders and regulatory approval.

Speculation has been growing that National City would be acquired.

The Cleveland-based bank on Tuesday said it planned to cut 4,000 jobs as the bank continues to struggle amid the ongoing downturn in the mortgage and credit markets. The bank reported a $5.15 billion third-quarter loss.

Problems in the mortgage and real estate markets since the middle of 2007 have hit National City especially hard.

National City set aside $1.18 billion during the third quarter for loan-loss provisions, compared with provisions of $368 million during the same quarter a year earlier. Loan-loss provisions declined from the previous quarter, when National City set aside $1.59 billion to cover potential losses.

Source