The list of possible buyers for Riggs National Corp. has been whittled to four companies, and a source said a deal could be announced as early as this week.
Final bids have been submitted, and the four leaders are running through due diligence, according to sources familiar with the timetable.
After it came under criticism from regulators for its failure to report potential money laundering, the $6.8 billion-asset Washington company said May 28 that it had hired Lehman Brothers to help explore its strategic options.
Analysts handicapped the field of potential buyers Wednesday, putting M&T Bank Corp. of Buffalo and Mercantile Bankshares Corp. of Baltimore ahead of PNC Financial Services Group Inc. of Pittsburgh and National City Corp. of Cleveland.
M&T already has operations in Riggs' area, deep pockets to pull off such a deal without much of an earnings hit, and a track record of buying ailing companies and turning them around. Mercantile is a local company that has long acknowledged that Riggs is an attractive potential target.
On the other hand, National City and PNC have talked recently about the desire to expand into new markets, and buying Riggs would do just that. Also, National City's plan to sell its National Processing Corp. division to Bank of America Corp. would free up $1.4 billion.
Spokespeople for M&T, Mercantile, National City, and PNC would not comment. A call to Riggs was not returned.
Wachovia Corp. and BB&T Corp. are also thought to have expressed interest in Riggs, but Wachovia is occupied with its deal for SouthTrust Corp., and BB&T has sworn off big deals for the foreseeable future.
Investment bankers said they expect Riggs to fetch a price of between $700 million and $750 million, or $24 to $26 a share. Its stock jumped more than 5% during the day, closing up 4.9%.
The news of an imminent sale came as four Riggs executives, including Lawrence I. Hebert, president and chief executive officer of the bank unit, prepared to testify before the Senate Permanent Subcommittee on Investigations today. The subcommittee released a scathing report Wednesday that documented lax anti-laundering controls at Riggs. [See "
Riggs, a storied 168-year-old company with ties to Washington's power elite and diplomatic circles abroad, stumbled in how it allegedly handled customer accounts linked to the governments of Saudi Arabia and Equatorial Guinea. Regulators told Riggs last year to shore up its anti-laundering controls.
In March the Office of the Comptroller of the Currency warned that Riggs had not followed through and threatened to put it under extra supervision. The Treasury Department's Financial Crimes Enforcement Network also told Riggs it was considering enforcement action for alleged violations of the Bank Secrecy Act.
Riggs agreed in May to pay $25 million to settle claims that it had failed to adequately monitor customer accounts. The OCC designated it as being in a "troubled condition," a status that puts restrictions on what its management can do.
The regulatory troubles have exacerbated performance issues at Riggs, which has struggled with profitability for three years. It posted a $23.4 million loss in 2001 and modest profits of $13 million for 2002 and $979,000 for 2003. The $25 million fine would wipe out its earnings for this year.
It has agreed to shut down its diplomatic banking business (which handled the foreign accounts in question) and focus on its basic banking operations in the Washington area, where it ranks far behind the market leader, Wachovia.
Analysts say Riggs has attractive qualities for any buyer, including its marquee branches across the street from the White House and in the heart of Washington's tony Georgetown neighborhood.
Investment bankers said a sale has been prevented by the Allbritton family, which controls 41% of Riggs' shares and has not shown a willingness to let go, despite several offers over the years. Joe L. Allbritton, a scrappy Texan, was the chairman and CEO from 1981, when he bought the company, until 2001, when he handed day-to-day management to his son Robert. Joe Allbritton remained on the board until May, when he said he would not stand for reelection.
Several other management and board changes have been made. One of the most significant, observers have said, was Anthony Terracciano's election to the board. Mr. Terracciano has made a career of fixing troubled banks and then selling them and making mountains of money for shareholders, including himself.
Observers have speculated that the extra pressure on management from regulators would finally induce a sale, and Mr. Terracciano's presence on the board is seen as speeding that process along.
