First Niagara Financial Group, Inc. (FNFG), the parent company of First Niagara Bank, Tuesday announced the signing of a definitive purchase agreement to acquire $4.2 billion of deposits and 57 bank branches in Western Pennsylvania from National City Bank, a subsidiary of PNC Financial Services Group, Inc. (PNC), for a deposit premium of 1.3%. First Niagara expects the acquisition to close in September 2009 and to be earnings per share accretive by nearly 20% in 2010.

PNC is divesting the branches due to a regulatory condition in its purchase of National City in December 2008. The PNC - National City acquisition deal of $5.58 billion was signed in November last year and it placed PNC fourth among U.S. banks in number of branches.

First Niagara said the acquisition immediately provides with more than 400,000 customer accounts and the number-three deposit market share position in the combined Pittsburgh, Erie and Warren regions. The company also said that the transaction is the latest in a series of acquisitions that it made over the past decade.

In addition to $3.2 billion in cash, First Niagara will receive about $839 million of performing business and consumer loans as part of the agreement. The companies' boards of directors have approved the acquisitions of branches. As of December 31, First Niagara had $5.9 billion in deposits and $9.3 billion in assets. It operates 113 branches and four Regional Market Centers across Upstate New York.

Commenting on the transaction, First Niagara's President and Chief Executive Officer John Koelmel said, We are also very pleased to be able to retain 500 jobs in the Western Pennsylvania market and add upwards of 200 new jobs there and in Upstate New York during these very challenging economic times.

First Niagara anticipates that approximately 500 employees in Western Pennsylvania, most of whom work in the branches to be acquired, will join the company. In addition, the company will create 50 to 75 new jobs in and around Pittsburgh to support the newly acquired branches and lending teams. The company also expects to add 100 to 125 positions in Upstate New York to support its new branch network in Pennsylvania.

Under a separate agreement with PNC and National City, First Niagara has the option to issue a combination of common stock and debt at closing in order to maintain its strong capital levels. As per the deal terms, the total amount of debt and stock would not exceed $150 million and 6.8 million, respectively.

The investment banking firm of Goldman, Sachs & Co. as well as the law firm of Luse Gorman Pomerenk & Schick advised First Niagara with regard to the transaction. PNC was advised by the investment banking firm of Sandler O'Neill and Partners and the law firm of Wachtell, Lipton, Rosen & Katz.

FNFG is trading at $12.41, up $1.22, on a volume of 2.43 million shares.

PNC dropped $1.54 and is trading at $32.27, on a volume of 2.55 million shares.

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