Spanish bank Santander SA, the largest bank in the eurozone, announced on Monday in Los Angeles that it is acquiring the American savings and loan bank Sovereign Bancorp in a stock swap transaction valued at $1.9 billion.
The transaction is expected to close in the first quarter of 2009, reported AP. A swap of 0.2924 shares of Banco Santander is planned for each Sovereign share. Sovereign’s stock fell 3.4 percent to $3.68 on Monday on the New York Stock Exchange (NYSE). In 2006, Santander paid $3.3 billion for a 24.9 percent stake in Sovereign, becoming its largest shareholder. According to the agreement, Santander was not allowed to purchase the remaining shares of Sovereign at market price until June 2009.
However, like other American banks, Sovereign is burdened with illiquid mortgage securities on its balance sheet, and in the second quarter reported a 14 percent drop in profit to $127.4 million. The management of Sovereign proposed to Santander to consider purchasing the remaining 75.65 percent of the bank’s shares, which Santander’s executive board accepted. Santander announced that the transaction meets its strategic criteria for acquisitions and will significantly expand its geographical presence and result in Sovereign’s net profit of $750 million in 2011. (H)
