Riggs, PNC Make Up, Agree to Cheaper Merger

The sale of Riggs National Corp. (RIGS) to PNC Financial Services Group Inc. (PNC) was resurrected Thursday, with Riggs agreeing to accept a 16 percent cut in the purchase price.

The companies announced the $654 million merger just three days after the original transaction fell apart in hostility and Riggs sued PNC. The new pact follows a guilty plea by Riggs' banking unit last month to violating the Bank Secrecy Act (search), an anti-money laundering law.

The new terms call for PNC to pay $20 per share in stock and cash for Riggs. That compares with the $24.25 PNC agreed to pay for Riggs last July in a transaction then valued at $779 million. The banks said the new agreement is otherwise "substantially similar" to the original pact.

"It gives PNC the entry it was looking for in the Washington (D.C.) market, but even at $20 a share, PNC is not getting a bargain," said Bert Ely, an independent banking analyst in Alexandria, Virginia. "Riggs' deposit franchise is not as strong as it was. There has been a lot of damage to its franchise, and PNC has to rebuild it."

Riggs, known as a banker to diplomats, is shedding its international banking operations following the guilty plea. It also agreed to withdraw Monday's lawsuit against PNC, in which it claimed PNC was trying to cut the purchase price unfairly.

The transaction is expected to close soon, and either bank may pull out after May 31 if the merger has not closed by then. PNC is based in Pittsburgh, and Riggs in Washington, D.C.

PNC shares rose 22 cents to $53.50, while Riggs fell 54 cents to $19.68.