Bank of America to buy MBNA for $35 billion; 6,000 jobs to be cut

NEW YORK (AP) _ Bank of America Corp. said Thursday it will acquire MBNA Corp., one of the world's largest credit-card companies, in a $35 billion cash and stock deal that will result in 6,000 jobs

Thursday, June 30th 2005, 8:50 am

By: News On 6

NEW YORK (AP) _ Bank of America Corp. said Thursday it will acquire MBNA Corp., one of the world's largest credit-card companies, in a $35 billion cash and stock deal that will result in 6,000 jobs cuts.

The deal is expected to close in the fourth quarter of 2005. Under terms of the agreement, MBNA shareholders will receive 0.5009 common shares of Bank of America plus $4.125 in cash for each of their shares. Based on Bank of America's Wednesday closing stock price, the deal values MBNA at $27.50 per share, a 31 percent premium to its Wednesday closing price of $21.07.

After the announcement, NYSE-listed shares of MBNA surged $4.95, or 23.5 percent, to $26.02 in premarket activity. Shares of Bank of America closed Wednesday at $46.91.

Bank of America expects the job cuts to help it achieve overall cost savings of $850 million, which would be fully realized in 2007, and anticipates a restructuring charge of $1.25 billion. Additional savings will be achieved through the elimination of overlapping technology, vendor leverage and marketing expense.

After the deal is completed, Charlotte, N.C.-based Bank of America said it will be one of the leading worldwide payments-services companies and issuers of credit, debit and prepaid cards based on total purchase volume.

MBNA President and CEO Bruce L. Hammonds, 57, will become CEO and president of Bank of America Card Services and report to Liam E. McGee, 50, president of Bank of America global consumer and small business banking. Hammonds will remain in Wilmington, Del., where MBNA is headquartered, and be part of Bank of America's risk and capital committee.

Frank P. Bramble, Sr., a vice chairman of MBNA, will be appointed to the Bank of America's board of directors.

Bank of America said the agreement has been approved by both boards of directors and is subject to approval by regulators and MBNA shareholders.

The company said about 55 percent of the combined company's earnings will come from global consumer and small business banking, 17 percent from global business and financial services, 11 percent from global capital markets and investment banking and 10 percent from global wealth and investment management.

``For our shareholders, the Bank of America and MBNA combination yields a diverse business mix less dependent on market-sensitive businesses,'' said Bank of America Chairman and CEO Kenneth D. Lewis said. ``The financial strength and cash flow generation of the combined entity should provide significant resources to support future growth.''