NEW YORK — Bank of America Corp. agreed to acquire MBNA Corp. for $35 billion to enhance its product mix and customer reach.
In a press release Thursday, the companies said the bid values MBNA at $27.50 a share.
Bank of America's proposal represents a premium of 31%, based on MBNA's Wednesday closing price of $21.07 on the New York Stock Exchange.
Each MBNA share will be exchanged for 0.5009 Bank of America shares and $4.125 in cash.
Bank of America expects to incur a restructuring charge of $1.25 billion related to the the acquisition.
Bank of America also expects to achieve overall expense efficiencies of $850 million, which would be fully realized in 2007. It anticipates cost reductions from 6,000 jobs cuts, elimination of overlapping technology, vendor leverage and marketing expense.
Bank of America said the acquisition combines the country's largest domestic bank with a leading provider of credit-card and payment products.
Bank of America added it will become one of the largest card issuers in the U.S. with $143 billion in managed outstanding balances and 40 million active accounts, after the transaction closes in the fourth quarter.
It also expects to add more than 20 million new customer accounts and affinity relationships with more than 5,000 partner organizations and financial institutions.
Bank of America, which had 2004 revenue of $48.89 billion, said the transaction creates a business mix that is less dependent on market-sensitive operations.
The company plans to maintain its capital strength and earnings diversity following the deal. About 55% of earnings will come from global consumer and small business banking and 17% from global business and financial services. The company also anticipates 11% from global capital markets and investment banking and 10% from global wealth and investment management.
Last week, Bank of America boosted its quarterly dividend 11% to 50 cents, bringing its annual dividend yield to about 4.25%. On Thursday, the company said it plans to continue a strong dividend for shareholders and repurchasing shares for the foreseeable future.
MBNA Chief Executive and President Bruce Hammonds agreed to serve in the same posts at Bank of America Card Services after the closing. He will report to Liam McGee, who is president of Bank of America Global Consumer and Small Business Banking. MBNA Vice Chairman Frank Bramble Sr. also agreed to join Bank of America's board.
The agreement was approved by the boards of both companies and requires approvals from regulators and MBNA shareholders.
Keefe Bruyette & Woods advised Bank of America. UBS Securities and Joseph Perella served as MBNA's advisers.
Bank of America and MBNA plan to discuss the transaction at a Webcast starting at 9:30 a.m. EDT. Their senior management plans to meet with the news media at 11 a.m. at the Waldorf Astoria Hotel in New York.
Shares of Bank of America closed Wednesday at $46.91, up 24 cents, or 0.5%, on composite New York Stock Exchange-trading. There is no premarket activity on the stock.
According to INET, MBNA's shares recently changed hands at $26.50 in the premarket.
