National City, the second-largest bank in the Indianapolis area, agreed to be absorbed by PNC Financial Services Group Inc. in a stock and cash deal that values National City at $2.33 per share, a 19 percent discount to yesterday's closing price.
The $5.6 billion deal, helped by a $7.7 billion infusion from the federal government's financial industry bailout plan, will create the nation's fifth-largest bank by deposits and fourth-largest by number of branches.
The combined bank will take the PNC name, the companies said in a statement this morning.
PNC does not have local branches, making it likely that the bank will retain the Indianapolis National City branches and employees, said John Reed, a local banking expert.
National City earlier this week announced plans to cut 4,000 jobs over the next three years in a bid to save more than $500 million. The bank, which employs about 1,200 in the Indianapolis area, did not say where it will make the cuts.
Reed said those cuts likely were part of the PNC deal, allowing the acquiring bank to avoid being the "bad guy" in new markets it is taking over.
The banks said the merger should save $1.2 billion by eliminating "operational and administrative redundancies" - code for employee layoffs.
PNC plans to buy National City with $5.2 billion in its shares and $384 million in cash payments to investors who had recapitalized the troubled bank.
National City on Tuesday reported that it lost $789 million in the third-quarter, its fifth consecutive quarterly loss.
Depositors pulled $1.3 billion from the bank in the most recent quarter, mostly to ensure accounts are fully covered by Federal Deposit Insurance Corp. insurance limits, leaving National City with $83.3 billion in deposits.
Shares in National City were down 20 percent, to $2.20, and PNC shares were up more than 3 percent, to $58.88, in recent trading.