Capital One now to pay $5 billion for Hibernia bank, 9 percent below prior price

Friday, September 2nd 2005, 10:17 am
By: News On 6

MCLEAN, Virginia (AP) _ Capital One Financial Corp. said Wednesday it renegotiated its purchase price for New Orleans-based bank Hibernia Corp. in light of the effects of Hurricane Katrina, and will now acquire the company for $5 billion (euro4 billion) in stock and cash.

The new purchase price represents a 9 percent reduction in value from Capital One's prior bid of $5.3 billion (euro4.3 billion). The companies now expect the transaction to close in the fourth quarter of 2005.

Capital One had originally planned to close its purchase of Hibernia on Sept. 1, but the companies mutually agreed to extend the deadline to Sept. 7 because of disruptions caused by Katrina.

Under the new merger agreement, Hibernia shareholders will receive about $30.49 per share in cash and stock, based on Capital One's Tuesday closing share price. The $5 billion (euro4 billion) deal includes about $2.2 billion (euro1.8 billion) in cash.

Hibernia shares fell $1.16, or 3.7 percent, to $30.24 in early trading on the New York Stock Exchange after the news. Capital One shares rose 93 cents, or 1.2 percent, to $81.51 on the NYSE.

After completing due diligence efforts in the wake of the storm, the boards of both companies concluded that completing the transaction under new terms is in the best interest of their shareholders.

The companies said they made an initial assessment of the impact of Katrina on Hibernia's facilities _ including its retail branches and headquarters building in New Orleans _ its loan portfolio, and its future business prospects including the significant federal and state aid and insurance proceeds expected to be received by victims of the hurricane in Louisiana.

Capital One expects to update its earnings guidance for the full year ending Dec. 31, 2005, as well as estimated financial impacts of the transaction in 2006 and 2007, in connection with its third-quarter earnings announcement.

Hibernia said its business-critical systems are up and running to support open branches and the bank's customers. More than 100 of Hibernia's 321 locations are in areas affected by Katrina. Of these branches, 47 have been reopened, and work is under way to open more as the situation allows.

Of the 60 branches yet to be reopened, 21 appear to have sustained significant damage. These 21 branches account for about 5 percent of Hibernia's deposits, the bank said.

The transaction is subject to the satisfaction of customary closing conditions, including Hibernia shareholder approval of the revised terms.