Saturday, July 17, 2004

PNC buys bank of diplomats

As part of deal, Riggs will end shadowy business that led to $25 million fine

By Marcy Gordon
The Associated Press

WASHINGTON - PNC Financial Services Group is buying Riggs National Corp. in a $779 million deal that will shutter the embassy and foreign businesses that were Riggs Bank's hallmark - but led to a $25 million fine and government scrutiny over its treatment of dictators' and diplomats' accounts.

The cash-and-stock merger was announced Friday by Pittsburgh-based PNC, a regional banking powerhouse. It is more than 12 times bigger than Riggs, an old-line Washington institution with a virtual monopoly on business with the capital's diplomatic community.

PNC, the parent of PNC Bank, operates the fourth-largest bank in Greater Cincinnati with 48 branches.

As part of the deal, Riggs will shed all of its diplomatic and international businesses.

PNC said it expects Riggs' current regulatory issues to be mostly resolved before the deal closes in early 2005, but the merger agreement gives PNC the right to walk away if significant new regulatory troubles arise for Riggs before then.

The Riggs name also will be replaced by PNC at the bank's 50 or so branches in Washington, Maryland and Virginia.

"The Riggs we will acquire will not be the same as the Riggs of today," PNC chief executive James Rohr said in a conference call with analysts. "We will be acquiring a clean company, to the best of our knowledge."

The merger deal values Riggs' shares at $24.25 each, a 7 percent premium over their Thursday close, but Riggs shares finished up only up 5 cents, or 0.2 percent, at $22.72 Friday on the Nasdaq Stock Market. PNC shares slipped 67 cents, or 1.3 percent, to $50.56 on the New York Stock Exchange.

Under the agreement, PNC is offering $321 million in cash and 7.5 million of its common shares.

With some 13 million Riggs shares, according to a recent filing, the bank's former chairman and chief executive Joseph Allbritton and his family could collect more than $315 million from the merger.

Rohr said PNC was buying Riggs to gain access to the "extremely appealing metropolitan Washington marketplace." But some analysts were skeptical.

"Unfortunately, PNC is late in the game, as competitors have already covered the more attractive markets surrounding the city," said Standard & Poor's credit analyst John K. Bartko.

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