July 22, 2024

DealBook: Capital One to Buy ING’s Online Bank for $9 Billion

Peter Foley/Bloomberg News

9:54 p.m. | Updated

Capital One Financial agreed on Thursday to buy the ING Group’s online banking unit in the United States for $9 billion in cash and stock, one of its biggest efforts yet to add to offerings beyond credit cards and other consumer lending.

Under the terms of the deal, Capital One will pay $6.2 billion in cash and issue $2.8 billion worth of new shares to ING, giving it a 9.9 percent stake. ING will also have the right to name a director on Capital One’s board.

Long known for cheeky credit card ads asking customers “What’s in your wallet?” Capital One is seeking to build up a national banking franchise. Buying ING Direct USA, one of the best-known online banks in the country, will help give Capital One a broader platform and a huge source of lower-cost funds.

Currently the eighth-biggest bank in the country by deposits, Capital One will rise to the fifth-biggest through the deal.

“The acquisition of ING Direct is a game-changing transaction that delivers attractive deal economics immediately and compelling long-term strategic value,” Richard D. Fairbank, Capital One’s chairman and chief executive, said in a statement.

ING was reluctant to shed its online banking business, one of its crown jewels and a leader in the expanding direct banking industry. But it was forced to sell off the unit by the European Commission as part of the bank’s 10 billion euro bailout in 2008.

“Although I regret that ING Direct USA will no longer be a part of ING, I am very pleased that we have found in Capital One a good home for our customers and employees, who are very important to the continued success of the ING Direct USA Business,” Jan H. M. Hommen, ING’s chief executive, said in a statement.

Capital One emerged the winner of a relatively crowded auction, one that also included General Electric’s GE Capital and the CIT Group, according to people briefed on the matter. One of the reasons Capital One prevailed was its willingness to shoulder more than $60 billion worth of mortgages and mortgage-linked securities.

In order to help pay for the transaction, Capital One said it planned to raise about $2 billion from a sale of new shares and $3.7 billion from selling new debt.

But the bank insists that the deal will pay for itself quickly. Capital One expects to reap $90 million in savings from combining back-end systems and staff, as well as $200 million from lowering funding costs. The transaction will also add to Capital One’s earnings per share beginning next year.

Shares in Capital One began rising on Thursday afternoon after Dow Jones reported news of the impending deal, closing up $1.13, or 2.4 percent, at $49.

The deal is expected to close by the end of the year or early next year, pending regulatory approval.

Capital One was advised by Morgan Stanley, Barclays Capital, Centerview Partners and the law firms Mayer Brown, Loyens Loeff and Wachtell, Lipton, Rosen Katz. ING Direct was advised by Deutsche Bank and JPMorgan Chase.

Article source: http://feeds.nytimes.com/click.phdo?i=2a0961d0223a19c2bea74547dc904901

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