PNC Plucks Riggs From Swamp

PNC Financial ( PNC) announced an agreement to acquire Riggs National ( RIGS) Friday, uniting a pair of banks that have been no stranger to scandal.

Pittsburgh-based PNC will exchange stock and cash worth $779 million, or $24.25 a share, to acquire the Washington financial stalwart, which was recently fined $25 million by the federal government for violations related to its handling of bank accounts for Saudi diplomats.

Riggs came under renewed scrutiny this week after a congressional report suggested it had done money-laundering transactions for former Chilean president Augusto Pinochet.

Riggs' stock closed at $22.67 Thursday. While PNC's offer contains a relatively modest premium compared with other big banking deals of late, the acquirer isn't getting much of a scandal discount, either. Riggs' stock has risen 37% this year and trades for 63 times this year's Thomson First Call earnings estimate and 52 times the 2005 forecast.

"We are confident, following completion of our due diligence work, that we can successfully work through the regulatory issues that have been identified at Riggs," PNC said in a statement. The bank expects the deal to add to its earnings in 2007.

Expectations that PNC would jump into the buyout game have stirred since Bank of America ( BAC) announced plans to scoop up FleetBoston last October. Riggs' possible acquisition was previewed by several media outlets earlier this week.

While a solid performer in 2003, PNC spent time under federal supervision after being forced into a $150 million restatement of its 2001 results. The company was accused of using special purpose entities to get troubled loans off its books. The stock closed at $51.23 Thursday.

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