REUTERS Capital One to buy North Fork for $14.6 billion
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By Mark McSherry
NEW YORK, March 13 (Reuters) - Capital One Financial Corp.
<COF.N> said it would buy North Fork Bancorp Inc. <NFB.N> for
$14.6 billion, cutting its dependence on Visa and Mastercard
business and giving it a strong retail banking foothold in the
New York area.
A combined Capital One and North Fork would be the No. 3
New York-area bank by deposits after Citigroup Inc. <C.N> and
JPMorgan Chase & Co. <JPM.N>, and the 8th-largest U.S. bank by
assets.
North Fork shares jumped 16.5 percent, while Capital One
fell 6.3 percent in early trading.
Together with its $5 billion purchase of Hibernia Corp., a
Louisiana and Texas retail bank, in November, Capital One, the
No. 4 Visa and MasterCard credit card issuer, would further
reduces its dependence on credit cards.
North Fork, based in Melville, New York, operates 353
branches, and Hibernia operated about 300.
"With North Fork, Capital One will be more balanced and
more diversified," said Richard Fairbank, Capital One's chief
executive, on a conference call.
McLean, Virginia-based Capital One agreed late Sunday to
pay $31.18 per North Fork share, a 22.8 percent premium over
Friday's closing price. North Fork shareholders will receive
cash or stock for their shares, in either case equal to $11.25
in cash plus 0.2216 Capital One shares for each share.
The price is equal to about 16.1 times estimated 2006
profit for North Fork, and 1.6 times book value. North Fork
shares have fallen 15 percent from their 52-week high in July.
The transaction is expected to close in the fourth
quarter.
Capital One expects $275 million in pretax savings from the
transaction, and sees the deal adding slightly to profit
beginning in 2008.
North Fork shares rose $4.10, or 17.7 percent, to $29.90,
while Capital One fell $4.68, or 5.2 percent, to $85.24.
UNDER PRESSURE
The combined company will have more than $84 billion in
deposits, a $143 billion managed loan portfolio, more than 50
million customer accounts and 655 branches.
Capital One, known for its cheeky television advertising
featuring actor David Spade, has been one of the
fastest-growing financial services companies since it was spun
off from Signet Banking in 1994.
But Capital One has been under pressure to find new
businesses and cut costs as demand for credit cards slows
following years of explosive growth.
Analysts had thought Capital One might be acquired,
particularly after Bank of America Corp. <BAC.N> purchased card
issuer MBNA Corp., but Capital One's new banking clout and size
could diminish that attraction.
North Fork Chief Executive John Kanas will become president
of Capital One's banking business, reporting to Fairbank, and
will join Capital One's board of directors.
Herb Boydstun, president of Capital One's bank unit, will
report to Kanas and oversee banking in Louisiana and Texas.
Capital One still expects 2006 profit of $7.40 to $7.80 per
share, excluding North Fork. Analysts polled by Reuters
Estimates, on average, expected $7.70.
Capital One stock dropped $5.67 to $84.25, while North Fork
advanced $4.21 to $29.61.
JPMorgan, Citigroup and law firm Cleary Gottlieb Steen &
Hamilton LLP advised Capital One. Sandler O'Neill & Partners
LP, Keefe, Bruyette & Woods Inc. and law firm Wachtell, Lipton,
Rosen & Katz advised North Fork.
(Additional reporting by Michele Gershberg and Jonathan
Stempel)
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13Mar06 14:51 GMT
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