Riggs Sues PNC, Calls Off Bank Merger

Riggs National Corp. (RIGS), whose banking unit pleaded guilty to last month to failing to report suspicious transactions, on Monday called off its merger with PNC Financial Services Group Inc. (PNC) and sued the Pennsylvania bank for damages.

Riggs said PNC's attempts to lower the purchase price constituted an "anticipatory repudiation" of the merger, and left it free to seek other merger partners. Riggs said it sued PNC in the Superior Court for the District of Columbia.

Calls to PNC and Riggs were not immediately returned.

Pittsburgh-based PNC agreed last July to buy Washington, D.C.-based Riggs for $24.25 per share, valuing the company at $779 million. A purchase would have helped PNC gain access to the fast-growing Washington market.

On Jan. 27, Riggs Bank pleaded guilty and agreed to a $16 million fine for failure to report suspicious transactions in accounts owned and controlled by former Chilean dictator Augusto Pinochet (search) and officials of the West African nation of Equatorial Guinea. A U.S. federal judge set a March 29 sentencing hearing.

Riggs said PNC most recently proposed a transaction in which Riggs shareholders would tentatively receive $19.32 per share — an amount it said could be lowered — plus a contingent security worth up to 83 cents per share.

"PNC knew that its revised terms and conditions would be unacceptable to Riggs," Riggs said. "We are particularly disturbed by PNC's new insistence that Riggs settle or reserve against private litigation as a condition of closing, even though we believe these claims are without merit."

Riggs shares fell 31 cents to $20.94 before a trading halt. PNC shares rose 68 cents to $54.88.