PNC Financial Services Group Inc will buy Royal Bank of Canada's (RBC) US retail bank operations for $3.45 billion, outbidding rival regional bank North Carolina-based BB&T Corp.
In the deal announced today, Pittsburgh-based PNC will own 424 Royal Bank of Canada branches in Florida, North Carolina, Alabama and other Southeastern states.
Under terms of the agreement, PNC will have the option to pay Royal Bank of Canada at closing up to $1.0 billion in common stock, or 3 per cent of PNC's outstanding common shares based on PNC's closing price of $57.79 on 17 June 2011.
The transaction has an estimated internal rate of return to PNC in excess of 19 per cent. The purchase price is currently estimated at approximately 97 per cent of RBC Bank (USA) tangible book value, based on its balance sheet as of 30 April 2011, and reflects a negative 0.6 per cent deposit premium, said PNC in a statement.
With approximately $25 billion of assets, Raleigh, North Carolina-based RBC Bank (USA) has 424 branches in North Carolina, Florida, Alabama, Georgia, Virginia and South Carolina. When combined with PNC's existing network, the company will have 2,870 branches, ranking it 5th among US banks.
The acquisition adds approximately $19 billion of deposits and $16 billion of loans based on RBC Bank (USA) balances as of 30 April 2011.