This agreement follows the close of PNC's first-quarter acquisition of Baltimore-based Mercantile Bankshares Corp. for more than $2.1 billion, which grew PNC's footprint by 240 branches. The YNB acquisition "is consistent with our strategy of expanding PNC's distribution in the rapidly growing and affluent Middle Atlantic region," says Joseph Guyaux, PNC's president, in a statement. He estimates a 15% internal rate of return from the transaction.
YNB has $2 billion in deposits and its branches are in central New Jersey and eastern Pennsylvania. They will be merged into PNC, and PNC expects the acquisition to give it the largest deposit share in the wealthy New Jersey counties of Mercer, Hunterdon and Somerset.
That price is $0.77 per share less than YNB stock closed on the Nasdaq exchange on Wednesday, June 6, the day prior to announcement of the proposed acquisition. YNB's first-quarter income was $5.1 million, down slightly from the prior-year quarter. During 2006, the company suffered bad loans totaling $29.5 million and took an extension for filing its 2006 annual report based on a material weakness relating to its risk ratings and the provision for loan losses. The annual SEC filing was completed on March 31.
The transaction is expected to close early in fourth quarter. The initial plan calls for a cash payment of $156 million and the exchange of nearly 3.3 million shares of PNC common stock, based on its closing price of $71.84 per share on the NYSE on June 6. The aggregate value could change, based on the average PNC stock-price prior to the close of the deal.
By midday, June 7, following the announcement, shares of PNC were trading at $71.41 a share, just a sliver below the previous day's close. The 52-week high of $76.41 occurred on Feb. 20 this year, and the 52-week low of $65.89 per share occurred on June 14, 2006. By contrast, shares of YANB on the Nasdaq dropped nearly 4.4% to $34.20 per share, following the announcement. That compares with a 52-week low of $33.63 per share on July 17, 2006 and a 52-week high of $40.02 on Nov. 16, 2006.
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