NEW YORK (AP) _ In its second major banking deal in a year, credit-card issuer Capital One Financial Corp. said Monday it has agreed to buy North Fork Bancorp. Inc. in a stock and cash deal worth about $14.6 billion.
The combined company will have deposits of more than $84 billion, putting it among the nation's top 10 banks by deposits.
The offer values North Fork at $31.18 per share, a nearly 23 percent premium to its closing price Friday, and the bank's shares surged on the news.
Capital One, which is based in McLean, Va., is one of the nation's largest credit card issuers. Last year, it paid about $5 billion for Hibernia Corp., a New Orleans-based bank that operates under the name Hibernia National Bank in Louisiana and Texas.
The addition of North Fork, a well-respected regional bank based in the Long Island town of Melville, will give Capital One additional retail outlets, including some 355 branches in New York, New Jersey and Connecticut.
``These acquisitions are taking Capital One away from the pure credit-card model into something more bank-like,'' said John McCune, director of banking research with SNL Financial, a research firm based in Charlottesville, Va.
He added, however, that it ``remains unclear how they are going to brand this, and what's their overall plan here.''
The rating agency Standard & Poor's, which is based in New York, put the ratings of Capital One on its ``watch positive'' list for an upgrade and affirmed its ratings for North Fork. Moody's Investors Service, meanwhile, put Capital One's ratings on review for possible upgrade and North Fork's on review for possible downgrade, reflecting in part ``the potential negative impact of structural subordination'' of its debt portfolio.
The Capital One-North Fork deal comes amid extensive consolidation in the credit card industry, mainly reflected in bank acquisitions of credit card companies. The advantage of such mergers is that retail deposit gathering is a good source of cheap funding for debt operations, including card issuance.
Last year, Washington Mutual Inc. of Seattle acquired credit card issuer Providian Financial Corp., and HSBC Financial Corp. acquired card issuer Metris Cos. Investment banker Morgan Stanley has announced that it will acquire British credit card Goldfish from Lloyd's TSB, expanding Morgan Stanley's Discover card division's reach into Europe. Meanwhile, Bank of America Corp., based in Charlotte, N.C., on Jan. 1 acquired credit card issuer MBNA Corp., creating the nation's largest credit card issuer.
While the trend has been for banks to purchase credit card issuers, Capital One has moved in the opposite direction, retaining its independence and acquiring financial institutions.
Capital One said the combined institutions would have a managed loan portfolio of more than $143 billion, more than 50 million customer accounts and some 655 retail branches.
``North Fork is a great strategic fit with Capital One and brings balance and diversification to our company,'' Richard D. Fairbank, chairman and chief executive of Capital One, said in a statement. ``North Fork provides us with a proven franchise and a strong growth platform in the largest banking market in America.''
John A. Kanas, North Fork's chairman, president and chief executive, will remain with the merged company as president of Capital One's banking business and will report to Fairbank, the announcement said. He also will join Capital One's board.
Herb Boydstun, president of Capital One's existing banking subsidiary, will continue to lead Capital One's banking business in Louisiana and Texas. Boydstun formerly was CEO of Hibernia.
Kanas noted that Capital One already has some 3 million customers in the tristate area where North Fork operations.
``Together we can create great value for our shareholders and customers by combining Capital One's financial strength, national brand, massive customer base, leading financial products and market capabilities with our strong, business-oriented banking franchise.''
The deal, which has been approved by both companies' boards, still must be ratified by shareholders and pass regulatory muster.
As announced, North Fork shareholders will receive cash or stock equal to $11.25 plus the value at closing of .2216 Capital One shares. Based on Friday's closing price, the transaction is valued at $31.18 per North Fork share, or a nearly a 23 percent premium.
In late morning trading, shares in Capital One fell $5.72, or 6 percent, to $84.20 on the New York Stock Exchange. Shares in North Fork rose $4.24, or nearly 17 percent, to $29.64, also on the Big Board.
The total transaction value of roughly $14.6 billion includes $5.2 billion in cash, which will be financed through a combination of internal resources and market financing. Additionally, Capital One said it expects to repurchase about $3 billion of its common stock in the open market following the closing of the transaction.
The transaction is expected to close in the fourth quarter of 2006. Capital One expects the deal to achieve pretax cost savings of $275 million and boost its earnings beginning in 2008.
In announcing the deal, Capital One affirmed its earnings-per-share guidance for 2006 of between $7.40 and $7.80 per share, excluding the impact of this transaction.