strengthened its hand in the auto finance business Monday, reaching a deal to acquire
and its publicly traded
( WFSI) unit for about $4 billion.
Wachovia will exchange stock worth $3.42 billion, or about $64.23 a share, for Westcorp, and will exchange $490 million, or $73.86 a share, for the 16% of WFS that is in public hands. In Monday trading, Westcorp closed at $61.35 on Friday while WFS closed at $64.92.
Wachovia sees the transaction doubling its portfolio of lending and other services for auto dealerships, making it the ninth largest auto loan originator. Wachovia will add about 8,500 automobile dealer clients, about 920,000 individual customers and 19 retail banking offices in Southern California.
"This transaction moves our auto finance business to a new level and gives us access to a new set of customers who can benefit from Wachovia's broad offering of financial services," Wachovia said. "Westcorp and WFS Financial have demonstrated a strong track record of growing revenue and earnings through all economic cycles."
The acquisition is expected to close in the first quarter of 2006. Wachovia, a retail banking behemoth based in Charlotte, N.C., says the transaction will produce an internal rate of return above 15% and should be accretive to GAAP earnings in the second year.