PNC Gets Federal Money, Buys Nat City

PNC Financial Services (PNC) agreed to acquire struggling National City (NCC) in a deal worth just under $6 billion.

Pittsburgh-based PNC agreed to pay $5.2 billion, or $2.23 a share, for Nat City and will pay $384 million in cash to certain warrant holders.

National City shareholders will be entitled to 0.0392 share of PNC common stock for each share of the Cleveland-based bank, the companies said.

As part of the deal, PNC said it had been accepted to take part in the U.S. Treasury's $250 billion capital initiative under the troubled asset relief program, or TARP, by selling $7.7 billion of preferred stock and related warrants to the government.

PNC estimates its Tier-1 capital ratio will be 10% after the equity injection.

PNC figures to be a part of several regional banks that are expected to received preferred equity investments from the government. They will join the likes of large banks including JPMorgan Chase (JPM), Citigroup (C), Bank of America (BAC), Wells Fargo (WFC) and others that will receive equity from the government.

Other regional banks including KeyCorp (KEY), Fifth Third (FITB), BB&T (BBT) and Regions Financial (RF) have also said they are considering selling preferred stock to the government.

PNC's core deposit base will rise to $180 billion, making the Pittsburgh-based bank the fifth largest in the U.S. by deposit size.

"At a time when core funding is key, we see our deposit strength as an important success factor. Upon closing the transaction, we will implement our successful business model and execute our strategies for managing risk, achieving cost efficiencies and growing high-quality revenue streams," PNC Chairman and CEO James Rohr said in a statement. "We believe this strategic combination will continue PNC's efforts to build capital strength and shareholder value. We are also gratified that we have been selected to participate in Treasury's capital purchase program, which has helped to put this transaction on a very solid footing."