25th Oct 2005 07:01
Banco Santander Central Hispano SA24 October 2005 MATERIAL FACT Banco Santander Central Hispano, S.A. ("Santander") has reached an agreementwith Sovereign Bancorp Inc. ("Sovereign"), a financial entity based inPhiladelphia (USA) to purchase 19.8% of the U.S. bank. Santander will subscribeto a capital increase for USD 1.950 billion and will acquire a further USD 450million approximately in shares from Sovereign's treasury stock, paying in bothinstances $27 a share. Sovereign will use the funds from these purchases,together with the proceeds of the sale to Santander of certain preferred stockand Tier I instruments, to acquire Independence Community Bank Corp. ("ICBC"),of New York. Following these transactions, Santander will have invested USD 2.4 billionapproximately in the purchase of 19.8% of the new Sovereign, generating forSantander a goodwill of USD 660 million (euro 550 million approximately). Once its acquisition of ICBC has been completed, Sovereign will be the 18thlargest bank in the U.S. by volume of assets and deposits, with USD 78.1 billionand USD 48.0 billion respectively. It will have a significant presence in thenortheast U.S., with 788 branches in New York, New Jersey, New England andPennsylvania, with 10,200 employees. This transaction is part of the Santander's strategy to divest its industrialholdings (Union Fenosa and Auna) and use these resources to make investments inbanking institutions. The investment in Sovereign also advances Santander'sstrategy of diversifying its businesses geographically, and with respect tocurrencies. The investment in Sovereign will be accounted for by the equity method and willcontribute positively to Santander's earnings per share from the outset. The agreement provides that following the completion of this capital increaseand purchase of treasury stock, Santander may increase its ownership to up to24.9% of Sovereign at market prices. Santander has also agreed that its stakewill not exceed 24.9% for two years after the closing of the initial purchase,expected by July 1st, 2006. After that period, Santander can decide to maintainits investment or it may increase it by acquiring 100% of Sovereign's capitalafter a process involving negotiations with the board of Sovereign. Santanderalso has the ability to sell its investment after 2 years subject to certainconditions which include the rejection by the Sovereign board of a proposal bySantander to acquire 100% of Sovereign that meets certain parameters. IfSovereign receives an offer from a third party, Santander will have certainrights of negotiation and "last look". Under this agreement, Santander will nominate two directors of Sovereign andSovereign's CEO will be named a director of Santander. The transaction is subject to approval by the Bank of Spain and the appropriateauthorities in the U.S. Boadilla del Monte (Madrid), October 24, 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Banco Santander