PNC buying BBVA USA for $11.7 billion

PNC Financial Services Group is buying BBVA USA Bancshares for $11.7 billion in cash.

The deal, announced early Monday, would rank among the biggest bank combinations since the financial crisis of 2008, creating a coast-to-coast franchise with about $563 billion of assets and branch presence in 29 of the nation’s 30 largest markets.

The $104 billion-asset BBVA USA, based in Houston, is a unit of Spain’s Banco Bilbao Vizcaya Argentaria. It was formerly known as Compass Bancshares, which the Spanish banking giant acquired in 2007 and rebranded first as BBVA Compass and later BBVA USA.

For PNC, the deal would be its first bank acquisition since it bought Royal Bank of Canada’s U.S. operations in March 2012 for $3.5 billion.

The $462 billion-asset PNC had been rumored to be eyeing a big acquisition since it divested its 22.4% stake in the asset manager BlackRock earlier this year, netting it about $5 billion after taxes.

In a news release, PNC Chairman and CEO William Demchak said the deal “will accelerate our growth strategy and drive long-term shareholder value through the strategic deployment of the proceeds from the sale of our BlackRock investment.”

Pittsburgh-based PNC has been on an expansion spree of late, opening branches in new markets such as Boston and Nashville, and the deal would speed up its national expansion strategy, Demchak said.
The sale, expected to close in mid-2021, would make PNC the nation’s fifth-largest retail bank, vaulting it over the $499 billion-asset Truist Financial — created through last year’s merger of BB&T and SunTrust Banks — and the $541 billion-asset U.S. Bancorp.

Unlike the BB&T-SunTrust merger, the PNC/BBVA combination would have little geographic overlap. More than half of BBVA’s 637 U.S. branches are in Texas, where PNC has no retail footprint. BBVA also operates in Alabama, Arizona, California, Colorado, Florida and New Mexico, most of which are markets where PNC has little to no branch presence.

PNC expects the deal to be about 21% accretive to earnings in 2022 and said it would “substantially replace the net income benefit” of its passive investment in BlackRock. The deal price is equal to roughly 1.34 times BBVA USA’s tangible book value and reflects a deposit premium of 3.7%.

Bank of America, Citigroup, Evercore and PNC Financial Institutions Advisory advised PNC on the deal and Wachtell, Lipton, Rosen & Katz served as legal counsel. J.P. Morgan Securities represented BBVA as financial adviser and Sullivan & Cromwell was BBVA’s legal counsel.


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