Capitol One to acquire HSBC’s domestic credit card business for $2.6 billionAugust 10th, 2011 - 8:49 pm ICT by BNO News
MCLEAN, VIRGINIA (BNO NEWS) — Capital One Financial Corporation on Wednesday announced that it has agreed to acquire HSBC’s domestic credit card business, including its approximately $30 billion credit card portfolio, for $2.59 billion.
The definitive agreement was signed for an 8.75 percent premium to par value of all receivables. As of June 30, the premium would have totaled $2.59 billion.
The acquisition includes ongoing private label and co-branded partnerships as well as infrastructure and capabilities that are expected to enhance Capital One’s partnership platform for future growth. The transaction is also expected to improve Capital One’s earnings and long-term capital generation trajectory.
“The acquisition of HSBC’s domestic credit card business is an attractive strategic and financial opportunity in a business we know well,” said Richard Fairbank, Chairman and Chief Executive Officer of Capital One. “Adding the HSBC card business to our own will enhance our credit card franchise and accelerate our achievement of a leadership position in retail card partnerships.”
Despite the expected addition of approximately $30 billion of HSBC credit card loans, the company does not expect a significant increase in total assets. The company expects to fund HSBC credit card loans primarily with cash and the proceeds from the balance sheet repositioning related to the pending ING Direct acquisition.
Capitol One, which is headquartered in McLean, Virginia, expects to complete the acquisition in the second quarter of 2012, and expects its Tier 1 common ratio to be in the mid-9 percent range at the end of the second quarter.
Capital One, at its sole discretion, also has the option of issuing $750 million of the approximately $1.25 billion to HSBC at $39.23 per share (the average of the closing prices of Capital One shares on Monday and Tuesday).
In connection with the transaction, Capital One expects to realize cost synergies of approximately $350 million and incur restructuring costs of approximately $420 million.
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