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Bank of America (BAC)
Bank of America Partners with MBNA Corp.
Bank of America Corporation announced Thursday that it plans to acquire the credit card giant MBNA Corporation in a deal of cash and stock worth about $35 billion. That would make the third largest bank in the U.S. one of the world's largest credit card issuers. Analysts predict that this type of merger is not an anomaly, but rather a new trend that is catching on, which could dramatically change the industry's landscape, as stand-alone credit card companies may become a thing of the past.
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Bank of America said the deal, which comes just two weeks after the Federal Reserve cleared the way for J.P. Morgan Chase & Co. to combine with Chicago-based Bank One Corp., is expected to close in the fourth quarter of 2005, pending approval from regulators and MBNA shareholders. The merger would result in the loss of about 6,000 jobs. After the announcement, shares of MBNA listed on the NYSE climbed 25 percent, or $5.34 to $26.41, while shares of Bank of America fell $0.83, or 1.8 percent, to $46.08.
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While some analysts have called Bank of America's purchase a risky move, Bank of America CEO Kenneth Lewis said in a statement to analysts in New York, “I do believe that MBNA is going to make us better and we're going to make them better, and we're going to transform our marketing capabilities as a result of this transaction. We will be a better marketing company because of this deal.”
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Bank of America said it expects to record $1.25 billion in “restructuring” costs resulting from the MBNA purchase, but projects that it will also save about $850 million a year in combined costs by 2007.
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“You can't just do credit cards by themselves,” said Nathaniel Paull, who helps manage $4.9 billion at New Amsterdam Partners in New York, including 1.7 million shares of MBNA. “You have to diversify the services you offer or merge with another company that offers those services.”
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And many analysts are saying it's this new mentality that could change the face of the financial services industry, as other large credit card companies could soon be up for grabs by leading mega banks.
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Profile |
Bank of America Corp. is the one of the larger banks in the United States. It has full-service operations in numerous states and the District of Columbia and provides financial products and services to households and businesses, as well as international corporate financial services for business transactions in countries across the globe.
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