MBNA Corporation Acquires Consumer and Commercial Revolving Credit Businesses of First Union

Strategic Insights -

MBNA Corporation, the largest independent credit card lender in the world, has entered into an agreement with First Union to acquire its consumer and commercial revolving credit businesses. The acquisition includes a consumer revolving credit portfolio of $5.3 billion in loans and over 3 million accounts, as well as a commercial credit card portfolio of $215 million in loans and approximately 300,000 accounts as of June 30, 2000. This acquisition will give MBNA a 22% penetration of the eligible market in the twelve East Coast states and Washington, D.C., where First Union has a physical presence.

Key Takeaways:

  • MBNA Corporation will acquire First Union's consumer revolving credit portfolio of $5.3 billion in loans and over 3 million accounts, as well as its commercial credit card portfolio of $215 million in loans and approximately 300,000 accounts as of June 30, 2000.
  • The acquisition will give MBNA a 22% penetration of the eligible market in the twelve East Coast states and Washington, D.C., where First Union has a physical presence.
  • First Union expects to record a gain of approximately $1.0 billion before taxes and expenses.
  • The transaction is expected to close in the 3rd quarter of 2000, subject to regulatory approvals.
  • MBNA will provide servicing for the existing accounts and market personal, business, corporate, and purchasing cards to First Union's 16 million customers under a long-term agreement.
  • MBNA will increase its capital ratios by raising common equity in excess of the amount required by this portfolio purchase without altering its non-dilution policy.
  • MBNA has sold 50 million shares of newly issued common stock to Goldman, Sachs & Co., at $32.50 per share less a fee.

Statistics:

  • $5.3 billion (consumer revolving credit portfolio loans)
  • 3,000,000 (consumer revolving credit portfolio accounts)
  • $215 million (commercial credit card portfolio loans)
  • 300,000 (commercial credit card portfolio accounts)
  • 22% (MBNA's penetration of the eligible market in the twelve East Coast states and Washington, D.C.)
  • $1.0 billion (expected gain by First Union before taxes and expenses)
  • 3rd quarter 2000 (expected closing date of the transaction)
  • $14 billion (First Union's stockholders' equity at June 30, 2000)
  • $76.3 billion (MBNA's managed loans)
  • 50 million (shares of common stock sold by MBNA)

Sources:

  • MBNA Corporation, press release, "MBNA Corporation Acquires Consumer and Commercial Revolving Credit Businesses of First Union," August 14, 2000.
  • First Union, press release, "First Union Announces Agreement to Sell Consumer and Commercial Revolving Credit Businesses to MBNA Corporation," August 14, 2000.
  • Goldman, Sachs & Co., press release, "Goldman, Sachs & Co. Announces Re-offering of 50 Million Shares of MBNA Corporation Common Stock," August 14, 2000.