Fed Greenlights PNC-Nat City Merger

The Federal Reserve on Monday approved PNC Financial Services' (PNC Quote) acquisition of National City (NCC Quote).

Pittsburgh-based PNC announced on Oct. 24 it would sell $7.7 billion of preferred shares and warrants to the government to finance its buyout of Cleveland-based National City. The government money came from the Troubled Asset Relief Program (TARP), a $700 billion pool set up in October to aid financial institutions struggling with the credit crisis.

PNC said it would buy National City for $2.23 a share, or a fixed amount of roughly $5.2 billion in PNC stock, while paying an additional $384 million to certain warrant holders.

Earlier this month, Rep. Dennis Kucinich (D., Ohio) voiced his opposition to the merger on the grounds that it would cost Cleveland-area workers their jobs.

The Justice Department on Dec. 11 announced that PNC and National City had agreed to sell 61 of National City's branches in western Pennsylvania. The Justice Department had required the sale as a condition for the deal, according to PNC.

PNC expects to the deal to close by month's end.

Shares of PNC fell 6.4% to close Monday at $46, and National City dropped 7% to $1.73.