PNC Financial Acquires Mercantile Bankshares for $6 Billion

PNC Financial Services Group Inc. (PNC), one of the nation's biggest regional banking companies, is buying the Mid-Atlantic region banker Mercantile Bankshares (MRBK) for about $6 billion in cash and stock.

Pittsburgh-based PNC said Monday the deal will significantly expand its presence in the Baltimore and Washington, D.C., areas. PNC got a foothold last year in the attractive District of Columbia market with its $643 million acquisition of Riggs Bank, which was headquartered in the nation's capital.

Based on PNC's closing stock price of $73.60 on Friday, the deal values shares of Baltimore-based Mercantile at $47.24 apiece, a 28.4 percent premium over their closing price of $36.78 on Friday.

Mercantile Bankshares shares rose $7.63, or 21 percent, to $44.41 in morning trading on the Nasdaq Stock Market. PNC shares fell $4.63, or 6.3 percent, to $68.97 in morning trading on the New York Stock Exchange.

Mercantile shareholders will receive a combination of 52.5 million shares of PNC stock and $2.13 billion in cash. Under the deal, each Mercantile share will be exchanged for 0.4184 shares of PNC stock and $16.45 in cash.

PNC expects the deal, which is expected to close during the first quarter of 2007, to add to earnings per share in 2008.

Two Mercantile directors will join the board of the combined company. Mercantile Chairman, President and Chief Executive Edward J. Kelly III will be named a PNC vice chairman when the deal is completed.

PNC has $94.9 billion in assets and more than 2.5 million consumer and small business customers in Pennsylvania, New Jersey, Maryland, Virginia, Delaware, Ohio, Kentucky, Indiana and the District of Columbia.

Mercantile has $17 billion in assets offering services through 240 offices in Maryland, Virginia, the District of Columbia, Delaware and southeastern Pennsylvania.

PNC said the deal for Mercantile should make PNC a top-10 U.S. bank holding company by market capitalization and the 11th largest U.S. bank by deposits.

It said the deal should enable it to cut more than $100 million of operating expenses through the elimination of operational and administrative redundancies.