Chillin' out till it needs to be funded
Even as China’s outbound investments climbed to $55 bln to match its incoming FDI of $45 bln, the deals remained in strong resource plays led by the large PetroChina play in Brazil.(update: Encana etc failed yet again but)
The deal canvas otherwise looks hot with BofA planning to rid itself of its remaining stake in China Construction Bank, and this time at a profit. As previously stated, PE firms are also out there looking for a regular IPO for their own Capital while other banks like ING and HSBC jiggle their US portfolio. Cap One’s purchase of ING led by Morgan Stanley and Barclays added a cool $10 bln o the month’s deal numbers. ING is also selling its European Car leasing business as it turns “Back to Basics” divesting some businesses for Capital refurbishment without the Dutch government Covenants for the same. The Car leasing business will likely deliver another $4 ln in cash/stock to correspondingly build up its Capital buffer
Royal Bank of Canada’s retail business has been purchased by PNC Financials for a similar $3.4 bln. RBC branches add $25 bln in assets to the $459 bln PNC book, from 6 states in South East US from its acquisitions of Centura, Eagle Bancshares and Admiralty franchises
The stock part of the deal will be limited to RBC not owning more than 4.9 percent of PNC’s shares at closing of the deal, expected in March 2012.
PNC executives said any common stock issuance tied to the deal will depend on the regulatory climate and economic conditions when it closes.
PNC expects to fund the cash portion of the buy with cash on hand, debt issuance and a preferred stock offering.
The purchase price represents a $112 million discount to the tangible book value of the unit.
Pittsburgh-based PNC will also buy RBC’s related credit card assets for $165 million.
RBC expects the deal to add to 2012 earnings, while PNC expects the purchase to add to its earnings by the end of 2013 or sooner depending on the stock component of the deal, the companies said in separate statements.
PNC projects it can cut $230 million in annual expenses from RBC’s U.S. operations, and is projecting an internal rate of return of more than 19 percent on the bank.
This deal adds to Bofa ML and JP Morgan
This also leaves BB*T to bid for other bank franchises in play
Walmart’s earlier deal announced with a South African retailer Massmart worth $5 bln has also been completed. Walmart got approval for its stake purchase of 51% from the Competition Commission last month
Meanwhile as CDS’s surge in bank plays, drubbing for bank socks has been further underwritten by bank analysts at Citi today morning:
Citi’s estimate for Morgan Stanley earnings goes to 43 cents a share from 59 cents. The Goldman expectations shrink to $2 a share from $3.75. Even the full year and 2012 estimates get a haircut from Citigroup. The earnings estimate on J.P. Morgan is trimmed by 3 cents to $1.36 a share. Goldman’s price target drops to $180 from $200, while Morgan Stanley gets trimmed to $26 from $28.(Deal Journal)
Bank Results Season