Acquisition in the US
Banco Santander Central Hispano SA
24 October 2005
MATERIAL FACT
Banco Santander Central Hispano, S.A. ('Santander') has reached an agreement
with Sovereign Bancorp Inc. ('Sovereign'), a financial entity based in
Philadelphia (USA) to purchase 19.8% of the U.S. bank. Santander will subscribe
to a capital increase for USD 1.950 billion and will acquire a further USD 450
million approximately in shares from Sovereign's treasury stock, paying in both
instances $27 a share. Sovereign will use the funds from these purchases,
together with the proceeds of the sale to Santander of certain preferred stock
and Tier I instruments, to acquire Independence Community Bank Corp. ('ICBC'),
of New York.
Following these transactions, Santander will have invested USD 2.4 billion
approximately in the purchase of 19.8% of the new Sovereign, generating for
Santander a goodwill of USD 660 million (euro 550 million approximately).
Once its acquisition of ICBC has been completed, Sovereign will be the 18th
largest bank in the U.S. by volume of assets and deposits, with USD 78.1 billion
and USD 48.0 billion respectively. It will have a significant presence in the
northeast U.S., with 788 branches in New York, New Jersey, New England and
Pennsylvania, with 10,200 employees.
This transaction is part of the Santander's strategy to divest its industrial
holdings (Union Fenosa and Auna) and use these resources to make investments in
banking institutions. The investment in Sovereign also advances Santander's
strategy of diversifying its businesses geographically, and with respect to
currencies.
The investment in Sovereign will be accounted for by the equity method and will
contribute positively to Santander's earnings per share from the outset.
The agreement provides that following the completion of this capital increase
and purchase of treasury stock, Santander may increase its ownership to up to
24.9% of Sovereign at market prices. Santander has also agreed that its stake
will 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 maintain
its investment or it may increase it by acquiring 100% of Sovereign's capital
after a process involving negotiations with the board of Sovereign. Santander
also has the ability to sell its investment after 2 years subject to certain
conditions which include the rejection by the Sovereign board of a proposal by
Santander to acquire 100% of Sovereign that meets certain parameters. If
Sovereign receives an offer from a third party, Santander will have certain
rights of negotiation and 'last look'.
Under this agreement, Santander will nominate two directors of Sovereign and
Sovereign's CEO will be named a director of Santander.
The transaction is subject to approval by the Bank of Spain and the appropriate
authorities 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 Exchange
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