Washington Mutual to Acquire FleetBoston Unit for $660 Million

Washington Mutual (WM Quote) agreed to acquire Fleet Mortgage, a unit of FleetBoston (FBF Quote), for about $660 million in cash, a deal that will help the company claim the nation's second largest mortgage servicing business.

The transaction, along with Washington Mutual's recent acquisitions of Bank United and the mortgage operations of PNC Financial Services Group, will increase the company's residential mortgage servicing portfolio to $451.5 billion, based on Dec. 31 figures.

At the end of 2000, on an adjusted basis, Fleet Mortgage had assets of about $6 billion. Washington Mutual, which will account for the transaction as a purchase, expects the deal to add "modestly" to earnings in 2001.

Following the completion of the transaction, Fleet will continue to originate mortgages in the markets served by its retail bank system. Most of the mortgages will be serviced by Washington Mutual. Fleet will continue its affordable housing programs and will maintain all of its existing commitments for affordable mortgages.

Washington Mutual, which is based in Seattle, expects to record goodwill of about $85 million, including $25 million of after-tax transaction expenses. FleetBoston expects to record an after-tax charge of about $200 million in the first quarter related to the sale of the mortgage business. Last year, Fleet Mortgage accounted for about 2% of FleetBoston's consolidated earnings.

Fleet Mortgage, which is based in Columbia, S.C., has more than 2,500 employees, with servicing centers in Florence, S.C., and Milwaukee, Wis. Fleet Mortgage's processing center in Providence, R.I., will remain with Fleet.

The boards of FleetBoston and Washington Mutual have approved the transaction, and the companies expect to close the deal in the second quarter.